Central banks in the US, Europe and Japan have been pouring new dollars, euros and yen into the system in an effort to “nudge” consumers to buy.\u00a0 People must be encouraged to act against their ‘irrational’ selves which can’t count on the future.<\/p>\n
Bankers worry too that consumers may create ‘deflation’ by deferring their purchases and driving prices down.\u00a0 Deflation is the opposite of inflation and its downward spiral is harder to stop.\u00a0 The US Federal Reserve succeeded in doing this by the policy of quantitative easing.<\/p>\n
Japan has tried to effect ‘reflation.’\u00a0 The Bank of Japan governor will push about $720 billion into the economy.\u00a0 WIll it work?\u00a0 The Japanese are more skeptical than Americans.\u00a0 They see themselves as just as rational if not more rational than bankers.<\/p>\n
Draghi in Europe prefers to state things as they are and tell the truth.<\/p>\n
Soft paternalism is complicated.\u00a0 Are people really not capable of reasoned reflection?\u00a0 Do they really need to be governed by careful ‘choice architecture?”\u00a0 Answers to these questions are being given by the actions of central banks across the world.<\/p>\n
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