We cannot be surprised that the central banks have so little visibility into these situations given the sheer opacity of the entire process. Arguably, it is why they are always reactive, with changes in their actions merely a question of how long a delay, rather than if there is a delay between a catalyst and a response.
It is curios that the universal CB mantra of transparency is accompanied by growing obfuscation, partly unintentional. This arises because each new ad hoc response to monetary emergencies is launched in haste, to be alleviated later with further ad hoc responses. The recent Minimum Reserve Requirement debate in the ECB is a perfect example. I'm convinced not a single central banker understands the full implications of either the size or the composition of their balance sheet.
We cannot be surprised that the central banks have so little visibility into these situations given the sheer opacity of the entire process. Arguably, it is why they are always reactive, with changes in their actions merely a question of how long a delay, rather than if there is a delay between a catalyst and a response.
It is curios that the universal CB mantra of transparency is accompanied by growing obfuscation, partly unintentional. This arises because each new ad hoc response to monetary emergencies is launched in haste, to be alleviated later with further ad hoc responses. The recent Minimum Reserve Requirement debate in the ECB is a perfect example. I'm convinced not a single central banker understands the full implications of either the size or the composition of their balance sheet.