This weekend in a little place called Jackson Hole, Wyoming, US, central bankers of the world are gathering for their annual contemplative retreat on the craft of monetarism and the state of the global economy. Deeply contemplative it may be, but it is too much to hope they will emerge from the Hole with a decision to stop digging.
For the best part of eight years since the global financial crisis they have been trying to produce sustainable growth with inflationary tools. They took their base interest rates as low as they could and when that didn't work, some took the rates below zero, effectively a charge for savings. When that didn't work, they started increasing the quantity of money in their economies. "Quantitative easing" hasn't worked either.
Lowering the cost of money might have prevented the GFC turning into the Great Depression, and increasing the quantity of cash might have avoided a "double-dip" recession, but it has become a tonic for every crisis. When Europe was struggling with the euro its central bank promised to "do whatever it takes". The morning after Brexit the governor of the Bank of England spoke resolutely from a rostrum resembling a papal window.
Flooding a crisis with cash may avoid the immediate consequences but it doesn't restore an economy to robust health, and it doesn't cure the cause of the crisis. It makes it worse. Cheap loans in the United States, made worse by financial markets' confidence the Fed would underwrite anything they did, created the sub-prime mortgage bubble that led to the GFC. Despite closer supervision of bank lending since then, house prices have been rising faster than before.
Meanwhile, the US economy takes fright every time the Fed tries to raise interest rates and the European Union and Japan are still flatlining on the life support of quantitative easing.