C) Give your answer to the question in the title

B) Single out the main facts from the text and present them in short essay.

A) Read and discuss the text.

Is Monetary Policy Needed?

Many people believe that central banks should conduct an active, interventionist monetary policy even through most countries are abandoning other forms of state intervention in their economies, such as price controls, income policies, and industrial planning. These and other forms of invention, such as agricultural policies and state ownership of business enterprises, waste economic resources and distort markets.

Monetary policy, which represents government intervention in the marketplace for credit, exhibits the same negative effects. The time has come to challenge the need for monetary policy as practiced by central bankers (often with finance ministry guidance). The financial markets, operating under appropriate tax and structural policies, will produce far greater price stability and smoother economic growth than central bankers can.

Some people still believe that controlled growth of the money supply will minimize inflation. In fact, the quantity of money in the industrialized nations today is essentially demand-driven. Currency, a key component of the money supply, is demand-driven when people can easily exchange unneeded currency for interest-bearing financial assets, such as bank deposits and bonds. Currency-driven inflations occur only when governments finance their obligations in currency that cannot be converted easily into other assets.

Bank deposits, the main component of the money supply in the industrialized countries, are demand-driven as well. This demand reflects the willingness of individuals and businesses to provide credit to the economy in which they operate, versus investing in real assets or moving funds to other countries.

Reserve requirements on bank deposits, still a favoured monetary policy tool of some central bankers, do not restrict bank lending.

As a practical matter, monetary policy in the industrialized world today essentially takes the form of announced official rates for lending to banks and central bank “steering” of short-term rates.

In effect, civil servants, called central bankers, tell participants in the highly competitive and increasingly internationalized financial marketplace what they, the civil servants, believe short-term interest rates should be.

Words you may need:

interventionist policy – інтервенціоналістська полїтика

abandon – відмовлятися від чого-небудь

exhibit – проявляти, показувати

demand-driven – той, що залежить від попиту

interest-bearing – той, що приносить процентний дохід

currency-driven inflation – інфляція, що є наслідком об’єму валютних засобів

convert – конвертувати

versus – проти, у порівнянні з

“steering” – управління, керівництво

civil servant – державний службовець

credit market – ринок кредитів

to clear the market – регулювати ринок

Дата добавления: 2014-11-29