June 4, 2017

IT'S A DEFLATIONARY EPOCH:

One of Trump's potential Fed picks is a huge fan of negative interest rates (Matthew C Klein, 6/02/17, FT Alphaville)

[I]t's also worth noting that Goodfriend's opposition to balance sheet expansion is paired with a radical willingness to embrace deeply negative rates. Negative rates are the one policy option Fed officials have studiously avoided discussing in public even though they have been adopted by the European Central Bank, the Bank of Japan, the Swedish Riksbank, and of course the Swiss National Bank.

Goodfriend presented on the subject at the Federal Reserve Bank of Kansas City's economic symposium at Jackson Hole in 2016. To Goodfriend, refusing to let nominal interest rates drop below zero is analogous to the gold standard and exchange rate pegs...

Else rates become usurious.

Posted by at June 4, 2017 12:21 PM

  

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