Meditations and Learnings

Meditations and Learnings

The Fool in the Shower

Milton Friedman once analogised an incompetent central banker to a fool in the shower. There is a delay between adjusting the water temperature and feeling the difference. Similarly, a central bank’s actions can take many months to impact the economy. An unwise central banker would constantly make decisions predicated on today’s economy. A wise banker appreciates the lag between recent action and when we can expect to see meaningful differences.