Economics
The Era of Cheap Money Shows No One Knows How Monetary Policy Works
- Low rates haven’t lured indebted households and businesses
- Central banks face questions as divide from politics blurs
This article is for subscribers only.
Monetary policy is supposed to work like this: cut interest rates, and you’ll encourage businesses and households to borrow, invest and spend. It’s not really playing out that way.
In the cheap-money era, now into its second decade in most of the developed world (and third in Japan), there’s been plenty of borrowing. But it’s been governments doing it.