Post on Interest Rates Lowering Savings
Posted by WARREN MOSLER on March 13th, 2012
On Mon, Mar 12, 2012 at 5:45 PM, Chris Powell <> wrote:
>
> http://www.nysun.com/national/bernankes-zero-interest-rate-policy-turns-out/87738/
yes, and nicely stated as well!
since rate changes have little or no monetary effect, congress should not be having the fed adjust rates.
March 13th, 2012 at 9:11 am
All the more reason to eliminate the payroll tax.
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WARREN MOSLER Reply:
March 13th, 2012 at 10:46 am
:)
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March 13th, 2012 at 10:32 am
Is Congress “having the Fed adjust rates”. If so, how does that work?
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WARREN MOSLER Reply:
March 13th, 2012 at 10:45 am
right now the fed votes on rates. instead congress could vote on rates
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jim Reply:
March 13th, 2012 at 2:40 pm
@WARREN MOSLER,
wouldn’t rolling dice be easier and more reliable?
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March 13th, 2012 at 11:08 am
Gee, if congress voted on rates, it would eliminate the major activity of the FED. What would be the need for the huge staff they have to recommend whether or not to change a rate by 0.25%?
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jonf Reply:
March 13th, 2012 at 3:22 pm
@Jim Thomson, Oh geez, that would mean the interest rate would become even more political than it now is. I can almost hear them now: it’s too low, no, it’s too high. And then there would be a filibuster by the guys who want it the other way. But you may end up hiring even more people than the fed has now figuring this stuff out. A whole new branch of economics and consultanta would emerge. So on second thought ……
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WARREN MOSLER Reply:
March 13th, 2012 at 3:24 pm
the risk free interest rate is necessarily a political decision. hence my permanent 0 rate proposal
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Tom Hickey Reply:
March 13th, 2012 at 3:59 pm
@WARREN MOSLER,
The point is that monetary policy was needed under a gold standard in order to ensure that there was sufficient demand for the currency to prevent runs on convertibility.
Now the reason is to influence the economy by influencing the cost of money to borrowers, chiefly investors. And, as Mike Sankowski has observed, a chief investment source is residential RE, so that monetary policy works primarily through housing. The lag time is significant making it a blunt instrument.
Monetary policy under the direction of the cb also results a command system overseen by unaccountable technocrats, which is the anti-thesis of both liberal democracy and market capitalism.
Moreover, events have shown that monetary policy is impotent in meeting the Fed’s congressional mandate regarding production, employment, and price stability.
So it is not only obsolete under the current system, it is also ineffective and in conflict with principal institutions of society. When little speaks for and much against, why is this being retained as if it were sacrosanct?
WARREN MOSLER Reply:
March 13th, 2012 at 9:48 pm
how about at cartoon with a martin luther type nailing a mmt document on the fed?
March 13th, 2012 at 7:18 pm
I have wondered what the Fed really does ever since I ran across this thing called MMT. But they prolly have a bunch of really smart guys there figuring out how to make all those TARP type loans. I mean we’d all be in the poor house by now, if they hadn’t loaned out that 29 T Randy wrote about. But you say they can’t really help with employment ?
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WARREN MOSLER Reply:
March 13th, 2012 at 9:54 pm
read ‘the 7 deadly innocent frauds’ on this website yet?
also, the 29T includes liquidity provision which I don’t call a bailout.
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jonf Reply:
March 13th, 2012 at 10:09 pm
@WARREN MOSLER, Well, yeah, but I’m being a little snarky here. But that $29t, how exactly did that work as liquidity? Didn’t that money go out to some banks? didn’t they need it for some reason?
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WARREN MOSLER Reply:
March 14th, 2012 at 12:17 am
banks deemed solvent by the fdic always get unlimited access to fdic insured deposits.
they only go to the fed, repo markets, or other banks if they can get a better rate.
and the fed uses its rate as its instrument of monetary policy via marginal cost of funds for banks
March 14th, 2012 at 8:43 am
Would a permanent 0 rate proposal lead to inflation below 2 percent?
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WARREN MOSLER Reply:
March 14th, 2012 at 9:45 am
it did in japan, so it’s obviously possible
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March 14th, 2012 at 2:19 pm
The rising push to eliminate “financial repression” and increase interest rates should be rejected by anyone who has any sense of social justice. In a nation (and world) that suffers from massive insecurity and marginal living standards, what are we to make of proposals that seeks to distribute public resources not based on need but on the size of one’s bank account? 80% of financial assets are controlled by just 7% in the US. What a mockery to see these same people, while pushing to increase their risk free returns, so righteously condemn the “outrageous” greed and immorality of Goldman Sachs.
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WARREN MOSLER Reply:
March 14th, 2012 at 3:20 pm
calling it financial repression should be rejected by anyone who’s read the 7dif on this website
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Art Patten Reply:
March 16th, 2012 at 11:39 am
@WARREN MOSLER,
:)
http://symmetrycapital.net/index.php/blog/2011/06/help-help-im-being-repressed/
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