Friday, March 20, 2015

Is patience virtuous for Central Bankers?

Fixing the economy can be a headache! Patience!
Credit: Christopher on Flickr.
When an economy’s recovery is cyclical, slowly expanding in jumps and starts, it faces a lot of potholes on its journey.

Where unemployment is admirably low, and consumer confidence now and for the future is high because wages are better; where even the minimum wage is being revised by private initiatives because energy costs are falling and expected to remain so - the economy should be in good standing with investors.

Yet, it is still in the shadows of a storm.

Deflation is an ever present danger. Deflation will take away all the hard fought gains of many quarters. If the inflation target is met, and not some sluggish below average outcomes, Central Bankers will go to bed without an insomnia. Yet, that privilege will not be given. Deflation will always be a terrible headache especially where another competing currency refuses to appreciate. You’d so wish that it does appreciate!

Where the market is aflush with liquidity everyone so detests and not the fundamentals. As a Central Banker one would have wished for fixed investments so that the recovery should rest on firm platforms, but what is foreseen and and the real dreams paint, are financial investments with enough liquidity.

Why shouldn’t the journey to recovery be full of potholes.

Patience on the potholes would be a virtue. When Google makes good its promise of a driverless car, maybe there'd be no more potholes, or maybe a flying car.

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