{"id":21653,"date":"2016-09-17T09:19:59","date_gmt":"2016-09-17T14:19:59","guid":{"rendered":"http:\/\/olduvai.ca\/?p=21653"},"modified":"2016-09-17T09:19:59","modified_gmt":"2016-09-17T14:19:59","slug":"central-banks-may-choose-helicopter-money-over-negative-rates","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=21653","title":{"rendered":"Central Banks May Choose Helicopter Money Over Negative Rates"},"content":{"rendered":"
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CENTRAL BANKS MAY CHOOSE HELICOPTER MONEY OVER NEGATIVE RATES<\/a><\/h3>\n<\/div>\n<\/header>\n
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The US Federal Reserve (Fed)\u00a0is considering raising rates<\/a>. Is the \u201cnormalization\u201d of interest rates about to happen which savers and investors have been yearning for? Most likely not. Policymakers are merely realizing that the policy of zero rates \u2014\u00a0or even negative rates as in the euro area or Switzerland \u2014\u00a0doesn\u2019t work as intended.<\/p>\n

The wider public is very much against it. Banks, for instance, run into trouble because their profits come under severe pressure in an environment of zero, let alone negative, interest rates. Bank clients start protesting as their bank deposits no longer earn a positive return. They even start redeeming their deposits in cash, thereby causing bank refinancing gaps.<\/p>\n

Negative Rates Under Another Name<\/strong><\/p>\n

However, central banks are quite unlikely to abandon the idea of pushing real \u2014\u00a0that is inflation-adjusted \u2014\u00a0interest rates into the negative. What they might have in mind is allowing for \u201csomewhat higher\u201d nominal interest rates, accompanied by \u201csomewhat higher\u201d inflation, making sure that real interest rates remain in, or fall into, negative territory.<\/p>\n

In this vein, the Federal Reserve of San Francisco suggested in a paper published on 15 August 2016 that monetary policy should rethink and possibly allow for an inflation of more than 2 percent.[1] The debate about higher inflation \u2014\u00a0say, 4 rather than 2 percent \u2014\u00a0is actually an old one; in academic circles it comes and goes in waves.<\/p>\n

The central argument is that a somewhat higher inflation would \u201cgrease the wheel\u201d of the economy, thereby supporting production and employment. Another argument has it that higher inflation would make it easier for the Fed to pull the economy out of recession, especially so if and when the \u201cneutral interest rate\u201d has come down considerably.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

CENTRAL BANKS MAY CHOOSE HELICOPTER MONEY OVER NEGATIVE RATES The US Federal Reserve (Fed)\u00a0is considering raising rates. Is the \u201cnormalization\u201d of interest rates about to happen which savers and investors have been yearning for? Most likely not. Policymakers are merely realizing that the policy of zero rates \u2014\u00a0or even negative rates as in the euro […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[124,7380,303,5981,426,431,14259,1264,3650],"class_list":["post-21653","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-banks","tag-cobden-centre","tag-fed","tag-helicopter-money","tag-inflation","tag-interest-rates","tag-negative-rates","tag-recession","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21653","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21653"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21653\/revisions"}],"predecessor-version":[{"id":21654,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21653\/revisions\/21654"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21653"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21653"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21653"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}