Push On A String

Recessions happen. One of the jobs of countries’ central banks is to help the economy climb out of recessionary holes, as the nation’s economy doctor. They do all the monetary policy things: buying and selling bonds to change the money supply, affecting interest rates.

Some people, however, think the central banks have very little effect on the health of the economy. People who feel this way in the U.S. might say that the Fed can’t “push a string” as a way to describe its ineffectiveness.

A subsect of those people think that monetary policy only really works in the constriction sense, i.e. getting people to spend less, and invest less, by raising interest rates. They say it doesn’t work the other way around, getting people to spend more when the economy is in a recession. "For central banks, pushing down is easy, but lifting up is difficult," these people say.

Pushing on a string was used in 1935 when the Fed itself said the power it has is little to get the economy back on track after the Great Depression.

Yeesh, can’t even push a string. “Great” depression indeed.