I’m a big fan of the original Winnie the Pooh stories. One of my favorites is when Pooh gets too much of a good thing, in his case honey, and gets stuck trying to exit Rabbit’s house. While most of us understand the idea of “too much of a good thing” when it comes to food, we don’t apply the same lessons when evaluating monetary policy. Yet there is solid evidence central banks aren’t delivering higher growth and may be undercutting their own mission by cutting rates too far.

Success (Or Lack Thereof)

Since the financial crisis of 2008, investors have welcomed rate cut after rate cut. The cuts were welcomed when the goal was to lower the cost of borrowing, when it was to decrease savings, and when it was to depreciate the currency.

But the results of all those rate cuts have been found wanting. The United States, Japan and Europe continue to struggle with low rates of growth. The U.S. hasn’t achieved 3% growth since 2004. The European Union seems stuck below 2%, and Japan is even lower. Emerging market economies aren’t picking up the slack, and the world still lacks sufficient growth.

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