Central Banks Have Violated Fundamental Laws Of Finance

Is Monetary Policy Too Complicated for Mainstream to Understand?

It is amazing how far Central Banks have been allowed to go with regard to policy tools and influence, and how extreme their policy measures have become since the financial crisis. No other form of governmental authority has been granted these types of unrestrained powers in any branch of government, not Congress, the Supreme Court, the President, or the Military for comparison`s sake in the United States.

These policy measures really are the perfect example of taking maybe what may be an effective policy tool in strategic, but rare instances and adopting it as an everyday, cure all that becomes standard operating procedure for a banking, finance and monetary system.

Healthy Financial Infrastructure

It has been said that a modern civilization needs a banking infrastructure to fully realize its potential, and grow from a business and economic standpoint that represents the modern capitalistic model which has greatly improved human technological, creative and individual prosperities. 

Central Banks & “Monetary Extremism”

However, the last seven years of Central Bank actions, and the last 6 months in particular with the ECB`s actions to enact extreme monetary measures, the Federal Reserve making excuse after excuse to defer normalizing monetary policy, the Bank of Japan just experimenting with monetary policy solutions, and the recent cascade effects on other central banks to lower their rates to combat the side effects of the first movers “monetary extremism” it has become abundantly clear to all but the politicians that central banks are no longer the all-knowing saviors of the financial system, but in fact have gone off the deep end, left to their own unregulated devices, and have become a large part of the problems in and of themselves. 

Basic Finance Principles the Starting Point for Economic Theory

There is a major distinction between economic theory, and finance theory but let`s get this one thing straight, economic theory starts with finance theory, and not the other way around. There are certain immutable laws of finance that should never be violated under most circumstances, even for a few months; let alone let to stand as permanent fixtures of the monetary system in a capitalistic system.