Quotation of the Day…

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… is from page 132 of Edward Chancellor’s excellent 2022 book, The Price of Time: The Real Story of Interest (footnote deleted; link added):

The Federal Reserve’s reflexive tendency to ease monetary conditions whenever markets become turbulent encouraged yet more risk-taking. [Claudio] Borio observed that central bankers were slow to hike rates during booms but rushed to ease them after every bust. Their asymmetrical approach imparted a downward bias to interest rates and an upward bias to debt, he noted. The danger arising from the Fed’s inconsistency was a long-standing concern: ‘lowering rates or providing ample liquidity when problems materialise but not raising rates as imbalances build up, can be rather insidious in the longer run. They promote a form of moral hazard that can sow the seeds of instability and of costly fluctuations in the real economy.’

DBx: Chancellor goes on to note that the internal quotation was penned (in a paper co-written by Claudio Borio and Philip Lowe) in 2002.

Alan Greenspan (pictured here) was not the monetary maestro that many had made him out to be. His successors have been no better.