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> By artificially keeping rates near 0%... I agree with your sentiment and artificially is a powerful word for conveying that. But strictly speaking the rate t
by benlorenzetti 9y ago
> By artificially keeping rates near 0%...
I agree with your sentiment and artificially is a powerful word for conveying that. But strictly speaking the rate the central bank sets for lending new money is artificial, or fiat, no matter what we decide it should be (So long as it is > 0).
- e_d_e_v 9y agoYou could set the rate for lending new money algorithmically based on a set of other observed statistics of the credit markets. Then it would not be artificial or fiat. The algorithm might be artificial but the rate itself would not. This is not (to my understanding) how it usually works.
- benlorenzetti 9y agoI would say the rate is still artificial. If windows were the only allowed OS and Linux and Apple users were regularly jailed, I think we would say the price for windows was artificial, no matter if it were set by a government approved algorithm or not. My point is that the connotation we associate with the word artificial varies with our opinion of the legitimacy of the monopoly in question. People who are disinclined toward the federal reserve will read artificial differently from those who think it does a good job.