There is considerable discussion about the possibility that the Federal Reserve could and possibly should create a monetary environment in which interest rates are negative.
First, why should it do this?
Second, is this even possible?
Third, if it is possible, under what conditions could/should the FED do this?
I am not speaking here of real interest rates, i.e., the cost of borrowing discounted by the rate of price inflation. That environment existed in the late 1970s when Federal Reserve policy under the pipe-smoking Arthur Burns and then the long-forgotten G. William Miller produced negative real interest rates. Prices were rising at rates higher than T-bill rates or T-bond rates. Investors lost wealth by investing in these assets rather than gold or silver.
There is considerable discussion about the possibility that the Federal Reserve could and possibly should create a monetary environment in which interest rates are negative.
First, why should it do this?
Second, is this even possible?
Third, if it is possible, under what conditions could/should the FED do this?
I am not speaking here of real interest rates, i.e., the cost of borrowing discounted by the rate of price inflation. That environment existed in the late 1970s when Federal Reserve policy under the pipe-smoking Arthur Burns and then the long-forgotten G. William Miller produced negative real interest rates. Prices were rising at rates higher than T-bill rates or T-bond rates. Investors lost wealth by investing in these assets rather than gold or silver.
Check Treasury rates on my site: the department on "Yield Curve."
Check the Median CPI and CPI on my site's department, "Federal Reserve Charts." Or just type "Federal Reserve Charts" on Google. My department is the top link.
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