Monetary policy is in need of perspective which extends beyond the boundaries of central bankers, if only because they are dependent on what happens in the real world for long term growth. The passive response of central bankers is due in part to a passive response from the supply side, regarding economic conditions. As a result, central bankers are tightening monetary policy in ways which will gradually tighten national welfare states, as well.
This wouldn't be so problematic, were it not for the fact supply side interests find it easy to rely on welfare states (in lieu of other options) even if they don't "like" them. Even though small government talk is (still) wishful thinking, a small government with an insufficient marketplace for services would be a catastrophe for knowledge use. If services start to disappear, it will be because of neglect, and the fact no one could sufficiently recreate them beyond the definitions of governments and special interests.
Central bankers - along with most everyone else - are wearily turning a blind eye to the costly realities which non tradable sectors continue to impose for their ongoing activities. Why else the wishful thinking to cut back on aggregate spending capacity because...hey, digital "free stuff"? When is the last time you had digital surgery or a virtual stay in the hospital? Innovation where it's most needed? Sure, you go first... No one likes the expensive consumption expectations, but it's not easy to confront the reasons many expensive "necessities" haven't changed one whit in recent decades.
Further - like it or not - these sources of nominal income - in the forms of welfare state goodies and artificially limited knowledge use - are indirectly responsible for a considerable degree of traditional production output. If there is no room in this vision for lower income levels, long term growth has been held back for other low income options as well. For these and other reasons, monetary policy has become too blurred, in terms of what central bankers actually rely on to fulfill their jobs. Indeed, central bankers are no longer clear, regarding instruments, targets and intermediate variables. Josh Hendrickson emphasizes the need for proper monetary semantics and adds:
Scott Sumner has chosen to think about policy in terms of nominal GDP. This follows from a quantity theoretic view of the world. If the central bank promotes stable nominal GDP growth, then inflation expectations will be stable and price mechanism will function efficiently. In addition, the central bank will respond to only the types of shocks they can correct.What if central bankers aren't ready to approach monetary policy directly, because of uncertainties regarding a complete and quantitative perspective? Do they find the requirements of a nominal target unsettling, given the recalcitrance of supply side interests regarding long term growth? If inflation expectations were really the primary concern in all this, why would it be so difficult to convince central bankers of the advantages of a nominal target?
Much of nominal income capacity remains tied to the welfare state, which will gradually become more (directly) affected by upcoming recession patterns. Only consider the bounce back of high wage work in the U.S. after the Great Recession. Unlike the lower wage jobs representative of many regions, high skill jobs in prosperous regions are more reliant on monetary flows throughout the world. This is just part of why general equilibrium appears somewhat nebulous. Central bankers may "cling" to an outdated interest rate defined equilibrium, because it feels as though the only concept within their control.
How could local corporations add perspective - let alone potential solutions - to all of this? For one, they would be able to address the need to create a stronger marketplace for the nominal income which is precariously connected to the welfare state. By generating a complete (alternate) equilibrium in terms of asset formation and services needs, local economies would also provide means to think beyond loan origination for economic growth and stability.
One could think of an incremental approach for local investment opportunity, as a quantity path. Time aggregates as a whole (local population totals) would be taken into account, as they contribute to equilibrium patterns over time in small group formations. Local corporations would eventually catch many of the forgotten in a safety net ("woven" of time arbitrage), and provide means for them to make lifelong contributions so these individuals don't have to burden already stretched welfare systems.
Not everyone in the future will be able to gain what is considered high income work. Just the same, there is no need for the negative connotations that tend to be associated with low income levels. Through ongoing innovation in non tradable sectors, even relatively low income levels can aspire to a high quality of life. These groups need reliable means for ownership and resource management, without having to resort to the use of loans.
Those among the marginalized also need to be able to directly observe, how monetary policy can contribute to both individual and group efforts in economic activity. Both asset formation and the knowledge use one associates with formal education, could follow an incremental or stair step investment pattern, from youth. By creating a direct association for time value with economic patterns, income capacity would become directly observable, in relation to resource use.
Local corporations could not only provide alternatives for today's endangered welfare state, but also for the asset formation which continues to be held back in the present. Local corporations can "go first" when no one else dares to take the chance. Eventually, local corporations could provide further rationale for central bankers to rely on a quantitative perspective, as well. By generating a reliable structure which does not include loan formation at the center, a quantity path would provide clarity, regarding income capacity for wealth creation.