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Ep 15: Controlling Credit (with Eric Monnet)

Library of Mistakes

CHAPTER

The Paradox of Central Bank Policy

Christine Lagarde said central bank policy of using interest rates to attempt to target demand is passé, and why we have to move on to something else. She recommends in her speech that the central bank bankers need to get on to the business of dealing with supply side, not demand side. I think most people would view that as a paradox because at that time central banks were definitely key institutions, but they were not taking the decision of allocation alone. Today when the ECB is saying, okay, we need to deal with supply side issues,. it's just, I mean, everybody see that just only at the business of the central bank.

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