Think of this behaviour in any other industry. As an oil firm, for example, I drill oil wells in distant expensive locations hoping it will be profitable. It tuns out not to be. So OPEC decides to cut me some cheap oil to compensate me. What sort of incentive does that give me?
The World Business Review has a wonderful conversation between three academic central bankers: Professor Alan Blinder, Professor Willem Buiter and Professor Avinash Persaud. Informed, high-quality, and with deep disagreement. Buiter gets my vote.
As he says, over the last 10 years, ``the Fed have solved one credit boom by creating the next one''. Here we go for the next one.
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