Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)
POSTED ON December 27, 2017  - POSTED IN Guest Commentaries

We talk a lot about how central banks serve as the primary force driving the business cycle. When a recession hits, central banks like the Federal Reserve drive interest rates down and launch quantitative easing to stimulate the economy. Once the recovery takes hold, the Fed tightens its monetary policy, raising interest rates and ending QE. When the recovery appears to be in full swing, the central bank shrinks its balance sheet. This sparks the next recession and the cycle repeats itself.

This is a layman’s explanation of the business cycle. But how do the maneuverings of central banks actually impact the economy? How does this work?

The Yield Curve Accordion Theory is one way to visually grasp exactly what the Fed and other central banks are doing. Westminster College assistant professor of economics Hal W. Snarr explained this theory in a recent Mises Wire article

Call Now