The coordinated work of monetary policy tools, such as the quantity of money and the interest rate tool. It’s the evidence that the Zero-Lower-Bound interest rate policy has become the boomerang effect of losses on Central Banks’ balance sheets, which have seen the prices of Sovereign debt securities decline as a capital loss, while the money market interest rates and the Yields of Sovereign Debt have increased necessarily, to establish the price of money and with that price stability. Recent excessive monetization of fiscal deficits and the mispricing of money at the Zero-Lower-bound large-scale asset purchase programs of the last decade has indeed created the presuppositions of future financial instability risks.
recent excessive monetization of fiscal deficits and the mispricing of money at the Zero-Lower-bound large-scale asset purchase programs of the last decade has indeed created the presuppositions of future financial instability risks, with losses on the Sovereign Debt holdings that have repriced down with rising yields, the Swiss National Bank has reported $ billions of losses on its equities(stocks) holdings, Belgium and other Central Banks have started operating with NEGATIVE balance sheets, the Federal Reserve itself has reported losses on its Treasuries holdings, the Bank of England has been on dire straits without being able to normalize interest rates above inflation, even worse with the outright selling of GILTs in the open markets, while the bank tapped the shoulder of the Exchequer for a £120 billion pound payment for fiscal deficit monetization. CENTRAL BANKERS HAVE MISTAKEN THE ZERO-LOWER-BOUND LEVERAGE FOR GENIUS. The pieces of evidence are overwhelming of balance sheet losses at Central Banks.
Monetarism needs to utilize the interest rate tool to be effective in pricing money and for the monetary policy transmission mechanism to mitigate the mispricing of assets and credit by financial markets institutions and investors. While also preserving the yielding store of value of money and the positive yielding Bank Deposits form of liquidity for savers and the wider economy, becoming investment spending. Hence, Central Banks need to contemplate the possibility of positive money market interest rates, while also providing qualitative asset purchase programs of positive yielding Sovereign Debt Securities, although still negative real yielding discounted for the rate of ongoing inflation. Central Banks shouldn’t, therefore, need to deviate the money market interest rate tool below the 2.0% money market interest rate level in line with the price stability anchoring at 2.0%. While at the same time utilizing qualitative asset purchase programs with open market operations of positive yielding Sovereign debt.
Indeed, the inflation-targeting models could have to emphasize the observed changes in the standard deviation of price rather than the smoothing averaging of nominal price percentage changes, in order to achieve a more effective price stability gauge in the wider economy.