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I'm interested to hear whether you think it is wise to raise the short term interest rate with the economy the way it is now. You are clearly on top of the posi
by roymurdock 11y ago
I'm interested to hear whether you think it is wise to raise the short term interest rate with the economy the way it is now. You are clearly on top of the positive economics of the situation, but I don't recall you making many normative statements in the past. You strike me as well versed in economics and quite rational and unbiased and I would value your opinions/insights.
- dragonwriter 11y agoI think the problems we have now are not really responsive to monetary policy -- what we are really need is better fiscal policy; unfortunately, we have a Congress that is completely disinterested in addressing economic problems by fiscal stimulus. Qualitatively, I'd be concerned about a rate increase having a negative impact on employment (the unemployment rate isn't bad now, but wages haven't done well, and the price of capital going up in those conditions would squeeze wages and employment further.) OTOH, one consequence of increasing income inequality and the stagnant lower end during the present expansion (and the past cycle, as well) could have made it more likely to be in a position where rate hikes to combat inflation are indicated and where rate hikes will lead to negative changes (rather than just slowing progress) on the employment front. Quantitatively, I'm not familiar enough with relevant models to have a firm opinion one way or the other on a rate hike and the relative employment vs. inflation risks.
- roymurdock 11y agoWhat fiscal policies would you recommend? Where should we cut back spending and where should that spending be channeled instead?