Beware of the dismal science — Monetary policy is not a science but an art

To promote a constructive public debate about SNB's monetary policy based on facts and economic science, monetary economists Stefan Gerlach, Yvan Lengwiler, and Charles Wyplosz recently founded the SNB Observatory.

Good idea, unfortunately, with a flaw.

Facts and economic science are not enough to discuss monetary policy. Swiss national interest, history, and current geopolitics are needed as well.

To put it another way, monetary policy is not a science but an art.

Suppose it is true, as the three Professors write, SNB's current strategy unduly restricts monetary policy. And thus prevents urgently needed monetary stimulus in case of a COVID-induced slump or a serious deflation. 

A slightly higher inflation goal and a clarification of the exchange strategy would be an all too weak medicine to prepare for such crisis-ridden times.

As long as the Swiss franc functions as a refuge currency for the rich, the upward pressure on its value will persist.

If this upward pressure collides with a necessary monetary stimulus sooner or later, the SNB will have to open the poison box, i.e. capital controls, split exchange rates for financial transactions and the real economy, etc.

Examine the poison box monetary politicians.