News for hackers. Stuff that matters.

A comment on Inequality, Interest Rates, Aging, and the Role of Central Banks. Parent comment

Re:Inequality, Interest Rates, Aging, and the Role of Centra... by whimsicalism on Wednesday September 01, 2021 @12:01PM (#28381521)
The Fed has effectively complete control over nominal rates, your mental model for the economy is incorrect.

I am unsure why you think that 0% is the natural rate for rates (I'm assuming you mean real as the alternative misunderstanding is even worse). People prefer to have money now rather than money later.

[ Parent | on HN ]
Re:Inequality, Interest Rates, Aging, and the Role of Centra... by imtringued on Thursday September 02, 2021 @05:37AM (#28390173)
He just means that raising interest rates will lead to less debt growth and therefore decrease inflation which then lowers the natural interest rates downwards where it will then get stuck at 0% because negative interest rates can't be implemented on cash.

According to the Friedman Rule 0% interest is an ideal interest rate assuming no inflation or deflation. However, what ideal really means in practice and whether we can actually have no inflation is still unknown.

[ Parent | on HN ]