Posted on 04/27/2009 8:32:34 PM PDT by TigerLikesRooster
Fed study puts ideal interest rate at -5%
By Krishna Guha in Washington
Published: April 27 2009 03:00 | Last updated: April 27 2009 03:00
The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve's last policy meeting.
The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation.
A central bank cannot cut interest rates below zero. However, the staff research suggests the Fed should maintain unconventional policies that provide stimulus roughly equivalent to an interest rate of minus 5 per cent.
Fed staff separately estimated what size and type of unconventional operations, including asset purchases, might provide this level of stimulus. They suggested that the Fed should expand its asset purchases by even more than the $1,150bn (€885bn, £788bn) increase policymakers authorised at the last meeting, which included $300bn of Treasury purchases.
(Excerpt) Read more at ft.com ...
omg these people have lost their minds
“Fed study puts ideal interest rate at -5%”
What the hell? The ideal rate is the market rate. The equilibrium rate. Since no one can possibly know that rate—and since negative five percent quite obviously could never, ever be that rate—this is nonsense.
So how much money can I make if I re-fi to a -5% 30-year mortgage?
You’d make nothing. The inflation such a thing would incur would eat up any ‘cash’ you might think you’re realizing. But such a ponzi sceheme is the sort of crap Axelrod and Emanuel would think was called for!
I think these clowns are hoping that China will PAY US for borrowing their money. This is the kind of thinking you expect to see from very desperate men. Very worrisome.
The ideal place to have a farm would be where there is plenty of water and sunshine.
Smack in the middle of the Atlantic, meets both requirements, therefore it would be ideal.
I don’t know what that means - sounded good when I was typing it, so let it stand.
Borrowing $1+ trillion makes a -5% interest rate very appealing.
Yes! At -5% I would like to borrow $100 million dollars for a year, please.
At that interest rate can I borrow a few trillion? I’ll pay the principle in short order.
“At that interest rate can I borrow a few trillion? I’ll pay the principle in short order.”
Why bother paying anything back? The Treasury never does.
Cool, I’d love to make money on borrowed money, I guess those who have savings accounts would be paying the bank interest for holding their money for them.
“Why bother paying anything back? The Treasury never does.”
That could really ruin their credit rating!;)
Based on what's outlined in this post, we'll be longing for the days of Carter's stagflation of about 20% inflation and 20% interest to reign it back in.
Living on beans and more beans around a campfire (Blazing Saddles) here we come... Or, the Mad Max lifestyle comes to a neighborhood near you.
The only way to keep a -5% real rate is to have an inflation rate higher than 5% so people would lose money by keeping their cash in the Serta National Bank. That means printing money - lots of it. And once you let that genie out of the bottle, keeping inflation in the 5%-10% range will be difficult to impossible.
Is there any NON-Gov’t entity that tracks inflation?
Inflation is the ONLY way the US Govt can deal with the massive debt Obama is creating, as well as the Social Sec. liabilities.
Having said that, we can trust the inflation figures we will be getting?
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