Since October 2015, I’ve argued that the Federal Open Market Committee (FOMC) should reduce the target range for the fed funds rate below zero. Such a move would be appropriate for three reasons:
- It would facilitate a more rapid return of inflation to target.
- It would help reduce labor market slack more rapidly.
- It would slow and hopefully reverse the ongoing and dangerous slide in inflation expectations.
So, going negative is daring but appropriate monetary policy. But it is a sign of a terrible policy failure by fiscal policymakers.
His argument is that the Swamps should fix social problems, and you can be certain he means stuff the public sector pensions with Federal tax payer money. His idea that negative rates are required is simply a result of his assumption that the Swamp controls rates. Yet we know that fiscal stimulus means stuff the pensions, and that does not make for more growth, that makes for more obligations in the Swamps and less discretionary spending. As it is, interest payments consume as much as the defense budget, and they cannot go higher as Congress would not function.
Better idea, dump the Swamp, dissolve the union.
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