Seeing central banks as just another participant, and not the core of the financial system, leads to interesting insights, especially with regards to the USD.
A quick way to see if central banks really have more insight into the future is by looking at their inflation forecasting record… which isn’t very good.
We need to boost real money supply. New loans, not bank reserves, & shift the paradigm away from central bank omnipotence to allow new solutions to be found.
Where government intervention can help is by encouraging banks to make more loans, since lending is what stimulates economic growth, not bank reserves.
If the current bank reserves focused policy framework can’t fix the issue of falling labor participation & money velocity, how can we solve these problems?
The effects of poor loan growth and credit market accessibility due to failed monetary policy combine to adversely affect the labor market and money velocity.
Central Banks need to shift their focus to the areas which are currently not part of the mainstream conversation – like loan growth and credit availability.