{"id":49750,"date":"2019-11-20T19:53:28","date_gmt":"2019-11-21T00:53:28","guid":{"rendered":"https:\/\/olduvai.ca\/?p=49750"},"modified":"2019-11-20T19:53:33","modified_gmt":"2019-11-21T00:53:33","slug":"fear-of-reversal-rates-sets-in-says-the-fed","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=49750","title":{"rendered":"Fear of \u201cReversal Rates\u201d Sets in, Says the Fed"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/wolfstreet.com\/2019\/11\/20\/fear-of-reversal-rates-sets-in-says-the-fed\/\">Fear of \u201cReversal Rates\u201d Sets in, Says the Fed <\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The fear that today\u2019s negative or low interest rates render central banks helpless in face of the next economic crisis.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There is now a new theory cropping up in Fed-speak and more generally in central-bank speak. It\u2019s not actually a new theory. I have been saying the same thing for years. In fact, it\u2019s not even a theory, but reality. But it\u2019s newly cropping up in reports from the Fed and the ECB. It\u2019s the concept of what is now called \u201creversal rates.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s an official admission that \u201creversal rates\u201d exist. The term crops up alongside the fear that countries with negative interest rates are at, or are already beyond, those \u201creversal rates.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The idea of interest rate repression is to induce businesses to borrow and invest, and to induce consumers to borrow and spend, and the hope is that all this will crank up the overall economy as measured by GDP.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cReversal rates\u201d is the term for a situation where interest rates are so low that they\u2019re doing more harm than good to the overall economy, and that lowering rates further will screw up the economy rather than boost it.<ins><\/ins><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Central bank monetary policy, such as cutting interest rates and doing QE, takes wealth and income from one group of people and delivers it to another group of people. This is how monetary policy works. It\u2019s not a secret. In central-bank speak, it\u2019s called the \u201cdistributive effects of monetary policy.\u201d The idea is that for the overall economy, this income and wealth transfer from these people over here to those people over there translates into more overall economic activity that adds to GDP.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fear of \u201cReversal Rates\u201d Sets in, Says the Fed The fear that today\u2019s negative or low interest rates render central banks helpless in face of the next economic crisis. There is now a new theory cropping up in Fed-speak and more generally in central-bank speak. It\u2019s not actually a new theory. I have been saying [&hellip;]<\/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":[303,534,3650,4255],"class_list":["post-49750","post","type-post","status-publish","format-standard","hentry","category-economics","tag-fed","tag-monetary-policy","tag-us-federal-reserve","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/49750","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=49750"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/49750\/revisions"}],"predecessor-version":[{"id":49751,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/49750\/revisions\/49751"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=49750"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=49750"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=49750"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}