In this context, the decline in the key federal funds rate is related to the fall in the natural real interest rate – a non-observable rate for which empirical results are accompanied by a high degree of uncertainty. Furthermore, it remains an open question whether expansionary monetary policy may itself have contributed to the natural real rate’s fall. In that case, the argument for lowering the central-bank rate would be circular.
The idea of the Doom Loop at Project Syndicate is being tracked.
But if the Fed is in a circular Doom Loop, then the next round of Nancy stimulus should increase the Doom Loop, not slow it. Someone of these economists is supposed to inform Nancy, but no one has. We will wait for some indication that Nancy is being properly advised as she does not read my blog.
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