The thing about monetary policy is that it frequently creates a variety of unforeseen effects — most of them bad effects. Even something as simple as an interest rate that everyone can see and understand (to a degree) creates massive waves that take years to play out, and that almost no one could predict with any accuracy.
Push on one end of the balloon and you might see some short term effects you were looking for (why oh why would anyone think focusing on short term stock market prices as a goal unto themselves is useful?). But then 10 years later: whoops housing crisis from perversely incentivized malinvestment.
I’m not even sure the PhDs in Jackson Hole are certain they know what they’re doing most of the time.
That’s because money is not just a store of value that you can buy things with, it’s a measuring stick for the relative value of everything from concrete things like labor, corn, and energy, to more abstract things like time and space. Prices are not arbitrary inconveniences that we can fix. The track record of fixing prices is unblemished by success. It’s not for a lack of trying, but it’s because prices mean something. When we try to fix them, they distort actual information that people base real world decisions off of. There’s no one-size fits all corrective lens for prices, so when you make one price more in focus through monetary policy, you distort thousands and thousands of others.
The fundamental issue plaguing mankind and the whole reason for markets and money is scarcity. I struggle to see how this monetary system does anything to mitigate scarcity. If anything, it makes price information more confusing. This system creates a massively distorted price signal for labor, which is a huge input for most goods and all services.
I can’t imagine what the after-effects would be. At the very least, it seems like it would create a huge amount of uncertainty that makes the corona virus seem like a hangnail.
Societal systems are not just extremely complicated, they’re also dynamic, and they’re all encompassing and not discrete from policy. In other words, a solution to poverty or scarcity or unemployment must be at least as complicated as the problem it seeks to solve, if it might work — but even then, the problem absorbs the solution as just another minute factor that’s much smaller than the whole. But frequently, monetary policy is a one giant hammer when we probably need a million watchmaker’s tools. Prices themselves frequently act as those tiny, articulate and subtle tools, making small but perceptible corrections and amendments to the myriad ways people interact.
The exception to this rule is when a solution completely destroys any semblance of the system itself. You can undo any functioning state, economy, business, or civil society with bad enough policy. As you hint at, the Marxists did just that in Soviet Russia. The system wasn’t working well for some people, so they destroyed the whole thing — which of course resulted in much more depredation and misery as a solution than the Czar eve enabled through his apathy.
