The Paradox of Risk: Leaving the Monetary Policy Comfort Zone

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The Paradox of Risk: Leaving the Monetary Policy Comfort Zone
By Ángel Ubide
Peterson Institute for International Economics, 2017
170 pp.
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Many books have been written on the origins, dynamics, and lessons of the financial crisis and recession of 2007–9. The year 2008 was arguably the worst financial year since 1931—which was a very bad year indeed. This important book distinguishes itself by focusing on how central banks—specifically, the U.S. Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan—took unconventional actions to avert another Great Depression. Ubide, an economist with extensive practical experience in wealth management, discusses misconceptions about the role of monetary and fiscal policies in contributing to and helping end the crisis; he argues that extremely low (even negative) interest rates, vast central bank purchases of bonds, and “forward guidance”—statements that central banks make to inform the public of likely future decisions—made sense to stimulate economic recovery in the wake of the crisis. Such steps, which were once unconventional, and are now more common, may become quite normal in future. This is something of a niche subject, but Ubide’s presentation of these ideas does not rely on overly technical language.

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