4 ms·
You are implicity assuming that the fed actually has the power to control interest rates in a meaningful way. However, in the end, the fed cannot depart too muc
by Hermel 11y ago
You are implicity assuming that the fed actually has the power to control interest rates in a meaningful way. However, in the end, the fed cannot depart too much from the "natural rate of interest" and there are hints that this natural rate currently is lower than ever before.
- jack9 11y agoThey do affect it in a meaningful way. They don't depart because it would tank sectors.
- dxhdr 11y agoWait, this is exactly backwards. The Fed explicitly controls interest rates because they control the supply of money. It's that simple. They do this by setting the federal funds rate, open market operations (direct bond purchases), and so on.
- Hermel 11y agoThey control nominal interest rates, but not real interest rates. In a world without real growth, you won't get significant real interest rates regardless of money supply.
- deleted 11y ago[deleted]
- deleted 11y ago[deleted]