IMF Chief Christine Lagarde has long been a proponent of government and central bank intervention. It could be argued, but not without dissent, that the philosophy worked during the recession. However, since the recovery has stalled, despite Herculean efforts, there is every bit of evidence that central banks, in and of themselves, cannot carry the weight of the recovery entirely on their backs. That is because of the politics which generally go one outside the doors of the banks, among politicians who have nothing better to do than be re-elected.
In new comments , Lagarde said:
First, the need for policymakers to work better together to take into account more fully the impact of these unconventional policies -- local and global -- and how that affects the path of exit. Second, that “all policymakers, within countries and across countries -- have a responsibility to take the full range of actions needed to restore growth and stability.”
"All policy markets" are usually at odds with one another, not just because of academic beliefs, but more because voters play to what they believe will add the largest numbers of jobs, and the greatest prosperity. Voters, of course, are often wrong.
Analysts do not need to look beyond Germany and Japan. The Bank of Japan my be the most interventionist in the world -- not surprising because its GDP has stagnated for so long, which was exacerbated by the earthquake and value of the yen. In Germany, both the central bank and ruling party of Angela Merkel have encouraged hands off. No wonder, Germany has suffered less than almost any developed nation in the world as the recession has ended.
Lagarde's encouragement is only good on paper.