If you look at the US, things aren't perfect, but they're a hell of a lot better than they are in Europe, where the ECB is not engaged in QE...
Well, maybe. Almost the entire difference in performance from Europe to America can be explained by the way they jiggle and jive the numbers...and the rigidity of the European labor market...but let's move on.
But do lower interest rates make it harder for small business to access credit? Surely, it's more a case of banks being unwilling to lend... not lower rates making credit harder to access...
But during deleveragings when central banks ran tight monetary policy (US in 1930-32; Japan 1990 to 2013; Pre-QE US 2008-09) we see:
We'll hold our disagreement for a moment while another central bank fan has his say. Here's Martin Wolf at the Financial Times who thinks the Fed has prevented 'depression-like' conditions in the US. :
First, because the comparisons offered purporting to show that loose monetary policy works better than tight policies are not persuasive. This isn't science. This isn't even pseudo science. This is just pure guesswork based on half-baked conclusions which themselves are grounded in dubious statistics and improbable assumptions.
Second, unless this really is a new era, it is still impossible for professors of finance to do a better job of setting prices than the market system. These guys had no idea what would happen. They had no idea what was happening when it happened. And they had no idea what to do about it after it happened. And now, Ben Benanke sets the price - as near as he is able - of short-term credit. Using his ZIRP and QE he aims to set prices for stocks and bonds too. Housing, too, is sensitive to Bernanke's heavy-handed interventions. Trying to raise the CPI, he is explicitly working to raise prices for all consumer items. Did price fixing work for Diocletian? Nixon? Hitler? Stalin? Peron?
Show us the case where price setting by government hacks has outperformed a market system. Show us the hack who is smarter and better informed than 300 million consumers, investors, and business people. Show us a single instance where the hacks have actually made people better off.
Third, the great claim made by both our own colleague and by Martin Wolf, not to mention Mr. Central Banker himself, is that central bank economists have avoided depression-like conditions. Well, if you were one of the 3 million Americans whose job doesn't exist you might think that depression-like conditions weren't avoided at all. Stocks went up. Housing is going up. But the economy? Do the math correctly - GDP and unemployment - and you see conditions that look 'depression-like.'
What the Fed has produced is depression-like conditions without the salutary effects - the creative destruction - of a real depression. A depression is like draino. It's a good thing - when it is short, swift and thorough. It flushes the gunk out of the economy's pipes. But the Fed didn't permit a real depression. It stopped the cleansing...and then dumped more goo down the kitchen sink. Dead-head bankers got more grease. So did big corporations and the government. And now, for 6 years, the system has been blocked-up with yucky stuff, retarding real growth.
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.