But charging banks to hold excess reserves is fraught with danger, and so far this idea has been eschewed in this country and has been proven ineffectual in Europe. With very little leeway available to reduce borrowing costs, these mainstream academics want to facilitate more negative real interest rates by ensuring inflation is higher right from the start. Probably because it is a nonsensical tenet and the biggest fallacy in all of central bank group think.The Fed wants the flexibility to make real interest rates more negative than the minus 2% that would be achieved at the zero-bound rate when using the current 2% inflation target. The math is simple: a three percent (or higher) inflation rate would equate to at least a minus three percent real F. Their spurious logic dictates that a lower unemployment rate is the primary cause of rising rates of inflation and that a higher rate of inflation is supportive for lowering the unemployment rate." "I was looking for him," said Icy Mae Franklin... She said the suspects had been threatening his 20-year-old sister.
Enter a word (or two) above and you'll get back a bunch of portmanteaux created by jamming together words that are conceptually related to your inputs.
The next recession could be just around the corner and the Fed is thinking about ways to stimulate the economy given the fact that the amount of ammunition--the number of rate cuts until the F. Exactly how this simple model arrives at that conclusion is never cogently explained; other than the mistaken belief that inflation and growth are synonymous terms.
But history and genuine economics clearly illustrate that inflation does not bring about growth, nor does it necessarily lower the unemployment rate.
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read more Raise the Inflation Target and Put a Date on It!