Cultures from all around the world have a long history of using military metaphors for a vast array of unrelated topics. Think of Sun Tzu dishing out philosophy in The Art of War during antiquity, and how this text has remained widely relevant today. For a modern example, look no further than football, where both teams try to march down the gridiron while battling in the trenches.
War metaphors are pervasive. At times, they are insensitive or inappropriate to the subject matter—such as calling an entertainer a “warrior” for performing their job.
However, it’s still a bit bemusing to see military metaphors invoked in the dull world of central banking and monetary policy.
Increasingly, policymakers have been referring to central banks’ “arsenal” of policy “weapons” as “sledgehammers” or “ammunition.” The media jumps all over this colorful language, referring to monetary stimulus as a “bazooka” shot. European Central Bank (ECB) President Mario Draghi joked that he ought to have chosen “Big Bertha,” the nickname of a famous howitzer German heavy siege gun model during World War I, when speaking about his central bank’s stimulus plans in 2012.
In short, the less effective that central bank policy has become, the more these kinds of comparisons and figurative language proliferate as policymakers attempt to appeal to public about what actions they are taking.
In some sense, this grandstanding would be comical if it wasn’t in regard to such a serious matter.
Further, as monetary policy has grown increasingly unorthodox, officials have gotten more creative with their figurative language.
Haruhiko Kuroda, the governor of the Bank of Japan (BOJ), actually alluded to Peter Pan in a speech last year: “The moment you doubt whether you can fly, you cease forever to be able to do it,” he playfully suggested as analogous to the efficacy of extreme interest-rate policies. Monetary policy authorities are turning toward increasingly abstract or far-fetched metaphors in order to justify their decisions and sell them to the public.
In the aftermath of the central bank symposium at Jackson Hole, WY that is hosted annually by the Kansas City Fed, the Federal Reserve Board (FRB) vice chair Stanley Fischer (pictured, left) made comments that he believes the use of negative rates has been “quite successful.” Fischer steered away from suggesting that the U.S. should adopt this extreme policy, but praised negative-interest rate policy (NIRP) as fitting “in a world where they seem to work.”
The main evidence that Fischer cites for his opinion? Negative rates “go along with quite decent equity prices”—in other words, they contribute to inflating a stock bubble.
Although Fischer avoids the martial allusions here, his comments are still revealing. So long as equity prices are sufficiently high, the markets an the broader economy must be fine. This is plain evidence of the Fed’s lack of impartiality when it comes to Wall St.
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