central bank

Not long ago, there was a debate in professional circles about the predictive value of central bank forecasts. They have been desperately inaccurate in the last few years, a time of severe price instability. The question has therefore arisen as to whether the models underlying these forecasts are sufficiently robust and realistic.

Polystyrene, wood, reinforcement steel, and other materials have not only become expensive, but their lack in warehouses indicates that the increase of prices will continue. It is similar with notebooks, bicycles, or maize.

Because of the binding constraints of European treaties and EU law, there are few remaining lines of attack against the Bank of Slovenia’s independence. This article places these developments within the normative and positive contexts of free markets.

Fear that people will not buy new flats because they will have higher interest rates. If the people do not invest more, the prices of these assets will stagnate or fall. Whoever buys in times of a loose monetary policy, wins. When screws begin to tighten, the winner is the one who sells first.

In the Czech Republic, we have gone through four decades of central planning of prices of practically everything. And the result? Either the price has been set too high and surpluses have been accumulated, or too low, and the television in the evening informed the audience about shortages of underwear and toilet paper.

Iceland does not have much chance to go wrong. The current system is sufficiently large a disaster to require trying something else. They experienced capital controls, hyperinflation and there are financial crisis on average every 15 years. The currency suffers from chronic degradation. It would be nice to take a chance on an experiment in a country where the changes of a poorly performing financial system cannot be impeded by too powerful bankers and politicians.