Is moderate monetary policy better than going to the extremes? The same can be asked of fiscal policy. Moreover, is a hypertrophic urge to prompt economic growth as if it were an end in itself better than seeking an economic equilibrium? Generally speaking, systems in equilibrium are more stable than those that include a schizogenic, or limitlessly maximizing, variable. An example of the latter is the population growth of our species relative to the equilibria otherwise established by the ecosystems in which we live. A desire for economic growth is a maximizing variable in a political economy. So too is the related practice of taking monetary (and fiscal) policy to an extreme. If the desire is great enough and the related policies extreme enough, the equilibrium of a political economy can be punctured with systemic risk increasing as does the instability of the system. I contend, therefore, that moderate government and central bank policies are preferable to going to the extremes. Here, I address monetary policy.
The full essay is at "Going to Extremes."