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Don’t Be So Negative

DON’T BE SO NEGATIVE

“FED’S WILLIAMS SAYS IN A DOWNTURN WE COULD CONSIDER QUANTITATIVE EASING, NEGATIVE RATES.”

  • Tweet by Reuters’ Jennifer Ablan, reporting on a speech by John Williams of the Federal Reserve Bank of New York at the Economic Club of New York, 6 March 2019.

“Because NIRP worked so well in Europe and Japan ?”

  • Response by mac on Twitter.

In February 2016, The Financial Times published an article titled ‘Central Banks: Negative Thinking’, co-authored by Robin Wigglesworth, Leo Lewis and Dan McCrum. The piece in question was atypically sceptical of the received wisdom of QE, i.e., that it works. If it was sceptical as to the efficacy of QE, it was doubly so in relation to the policy of maintaining negative interest rates, or NIRP. Some extracts follow:

Online, the mood has turned to rage. Forums have seen a flood of commentary from Japan’s retirees decrying negative rates and the “torture” that the BoJ’s policy is already inflicting. “Raising commodity prices to overcome deflation, raising consumption taxes, lowering interest rates . . . they are all policies that make us suffer,” wrote one..

The Japanese can be conservative at the best of times, and few think these are the best of times.

But Japan is not the only country affected. A concept once only subject to small-talk among economists is now an uncomfortable reality. With quantitative easing seemingly losing its power to dazzle markets, and many governments either unable or unwilling to countenance raising spending, central banks have felt compelled to try new tools.

Sweden, Switzerland, Denmark, the eurozone and most recently Japan — adding up to almost a quarter of the global economy — have all introduced some form of negative interest rate policy in an attempt to fight deflationary forces, weaken their currencies and stimulate growth.

 …click on the above link to read the rest of the article…

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