A Physics Lesson for Central Bankers

That's the kind of empirical evidence that should produce a reconsideration of what Rothschild Investment Trust Chairman Jacob Rothschild this week called "the greatest experiment in monetary policy in the history of the world." Neil Grossman, director of Florida-based bank C1 Financial and former chief investment officer at TKNG Capital Partners, likens the need to abandon the current economic orthodoxy with the impact of quantum physics on science in the last century.

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[The Fed's] Williams concluded that central banks should consider either higher inflation objectives or switching to GDP targeting: "Now is the time for experts and policy makers around the world to carefully investigate the pros and cons of these proposals," he wrote.

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I've written before about a theory dubbed Neo-Fisherism that argues for raising rates as a better solution to the current economic backdrop than driving them below zero. Maybe that's too radical to gain traction. But just as scientists are forced to review their assumptions when the experimental evidence undermines existing theories, central bank economists should acknowledge that the world isn't responding to their guidance in either the way they expected or how they would want it to. In short, a new approach to monetary policy is needed.