The Fed’s prolonged effort to maintain interest rates at abnormally low levels has deprived savers of hundreds of billions of dollars in interest income, ultimately costing the economy between 2.4 million and 4.6 million jobs, $256 and $587 billion in consumption, and 1.75% and 3.32% in GDP growth.
~ William F. Ford and Polina Vlasenko, from The Downside of Monetary Easing
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It is interesting to me that top economists seem not to understand or give weight to the fact that there are two sides to economic transactions. I cringe when I hear Bernanke talk about the need to cut rates or keep them low. He seems not to appreciate that we have a demograhic tidal wave of people seeking to live off of fixed income that he is forcing into taking excessive risks. It's as if the Fed just assumes that the best thing for a weak economy is to lower rates.ReplyDelete
Similarly when he talks about deflation he doesn't seem to understand that the overall price level; can fall for two reasons: inadequate demand (bad) but also technological advance (good). Again the Fed assumes that low interest rates are the solution to a low rate of inflation that threatens deflation.
I saw a commenter say one time
"the road to hell is paved with false assumptions". The commenter could be right.
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