Money, assets and central banks

PIMCO Bonds - FF Jan 05

Lovely analogy of the argument in favour of micro rather than macro solutions from the Fed.

"Or to return to an analogy I used last summer, if Mr. Greenspan were a bartender with one rowdy drunk:

He would double the price of beer for all, in an effort to bankrupt the drunk more quickly, rather than simply cut off the drunk, letting the decent folk continue
to act decently at an unchanged price.

I firmly believe that the welfare-maximizing policy for society would be to cut off the drunk. But I don’t run America’s monetary policy. Mr. Greenspan is the monopolist bartender, not me. Accordingly, if he wants to endeavor (one of his favorite words!) to engender uncertainty, otherwise known as fear, in the minds, hearts and wallets of those engaged in “excessive risk taking,” all of us, not just those engaged in excessive risk taking, should get a firm grip on our wallets.

Or, to return to my analogy, we should take a walk ‘round the block, until the rowdy drunk falls off his stool."

I would add - walk round the block, because the drunk will be pretty soon looking to borrow money to maintain the drinking. It's going to get ugly.