Why do you say there is no natural business cycle?
Which arrogant people? Usually, central bankers I've heard seem to think that monetary policy is useful for smoothing around the edges, but more than that requires fiscal policy, and that monetary policy can't make up for next neglect of fiscal policy (or unwarranted active fiscal interventions.)
Of course I am joking, they simply have no idea what they are doing, since it is virtually impossible. I grew up in post communism country and I have cold sweat when I hear about price control. And somehow price of the money is centrally managed.
I'm not sure that either of those statements is true. It could be, in some situations in some countries. As a general statement? No, because most government borrowing is not borrowing from the central bank.
> And somehow price of the money is centrally managed.
Empirically, that has worked out rather well - far better than "centrally managed" would lead you to expect. In particular, it has dramatically cut the number of severe downturns (which used to occur whenever the price of money became too high).
To be precise, it almost always against the constitution. The problem is, the amount of money the government can borrow is tied to the money supply. If FED raised rates a couple percent, US would bankrupt in a few days after.
> Empirically, that has worked out rather well .
That's arguable, since we don't know what would happen if we didn't intervene with artificial interest rates.
Is that your position?
If so, do you have any support for that position?
Sorry to leave you with a link, bed time ;)
Setting aside the fact that the fed funds rate can only wag the short end of the yield curve, I'd like to point something out.
If the coupon on ALL issued Treasury debt suddenly went to 10% overnight, then yes, we would be looking at possible solvency issues.
But that's not how it works. The coupon the US pays to creditors is fixed until the maturity date of the bond. The average maturity on issued bonds and bills is 69 months. Meaning that open market yields would need to remain at (2*(10-current average yield))% for nearly six years in order to get to that point.
Monetary policy might arguably set (and certainly effects) the outer bounds of fiscal policy, but it doesn't control fiscal policy.
Maybe, instead of a login-required paper, you could just state a position, and state what evidence you think makes that position reasonable?
There are 7 billions participants in the global economy and somehow FED pretends it has this magic ball that predicts what will happen in upcoming months. And even if it had, they have no proper tools to react on it properly.