{"id":56079,"date":"2020-12-19T08:31:33","date_gmt":"2020-12-19T13:31:33","guid":{"rendered":"https:\/\/olduvai.ca\/?p=56079"},"modified":"2020-12-19T08:31:33","modified_gmt":"2020-12-19T13:31:33","slug":"open-letter-to-gregory-mankiw-from-keith-weiner","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=56079","title":{"rendered":"Open Letter to Gregory Mankiw From Keith Weiner"},"content":{"rendered":"
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OPEN LETTER TO GREGORY MANKIW FROM KEITH WEINER<\/a><\/h3>\n<\/div>\n<\/header>\n
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Dear Professor Mankiw:<\/p>\n

I am writing in response to your article in the New York Times, \u201cThe Puzzle of Low Interest Rates<\/a>\u201d. I commend you for recognizing two important truths, which are missed by many other observers. One, that there has been a breathtaking drop in the interest rate over 40 years. Too many dismiss this with an airy hand wave, or deny it.<\/p>\n

Two, you see that the cause is not the Federal Reserve, at least not directly. As you note, the Fed aims to set the interest rate at levels determined by \u201cdeeper market forces.\u201d In my\u00a0theory of interest and prices<\/a>, I show how the Fed sets up a dynamic which is bigger than the central bank itself. Once set in motion, this dynamic moves in one direction for a long time, with positive feedback loops that act like a ratchet. Since 1980, we are in a powerful falling trend.<\/p>\n

However, you commit some big blunders too. One is that old saw that rates are falling because of falling\u00a0inflation expectations<\/em>. If the Treasury had a penny for every time someone repeated this error, it would have enough to pay off the debt (well, it could\u2014if there were a\u00a0mechanism to extinguish debt using irredeemable currency<\/a>).<\/p>\n

You cite Irving Fisher for this, but Fisher wrote during the\u00a0gold standard<\/a>\u00a0and virtually all of his work was done prior to when FDR made the dollar irredeemable to American citizens. In the gold standard, of course, people may invest their gold if they like the terms (including the interest rate). Or they can choose not to invest. Gold under the mattress is better than gold committed to a long investment at too-low interest rates.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

OPEN LETTER TO GREGORY MANKIW FROM KEITH WEINER Dear Professor Mankiw: I am writing in response to your article in the New York Times, \u201cThe Puzzle of Low Interest Rates\u201d. I commend you for recognizing two important truths, which are missed by many other observers. One, that there has been a breathtaking drop in the […]<\/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":[124,7380,30741,7957],"class_list":["post-56079","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-banks","tag-cobden-centre","tag-gregory-mankiw","tag-keith-weiner"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/56079","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=56079"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/56079\/revisions"}],"predecessor-version":[{"id":56080,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/56079\/revisions\/56080"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=56079"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=56079"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=56079"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}