Well, it begins: The push for subzero interest rates.
Narayana Kocherlakota, a Bloomberg columnist and former president of the Federal Reserve Bank of Minneapolis, wrote an op-ed in which he encouraged the U.S. central bank to slash rates to negative territory.
But the opinion piece fails to make the case for negative write, merely writing that “the Fed should take interest rates at least a quarter percentage point below zero.”
Perhaps it was a click-bait title since he only points out his disagreements with two concerns about subzero rates: Banks would simply avoid the charges by withdrawing their reserve deposits and holding the funds in paper currency, and Fed is giving up on unemployment reductions to help keep banks and their shareholders safer.
He also seems to recommend prohibiting large banks from paying dividends.
Overall, according to Kocherlakota, “the Fed is left no good argument against going negative.”
Well, economist Walter Block would like a word with you:
“A basic principle of Austrian economics is that the originary rate of interest (the rate of discount of future goods compared to present, otherwise identical, goods) can never be negative. The reason for this arises not because capital is productive, nor out of man’s psychology. Nevertheless, in spite of the foregoing, there are many benighted souls who insist upon the possibility of a negative rate of originary interest. They are continually discovering cases which “prove” their conclusion. The number of such examples has reached such proportions that it seems advisable to take account of them in a systematic way.”
Aren’t these interventionist ever satisfied?
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