4 ms·

Higher rates are coming, that's certain. Is there any work on estimating what the optimal interest rate is to combat the high inflation that we're seeing? I'm n

by axg11 4y ago

Higher rates are coming, that's certain. Is there any work on estimating what the optimal interest rate is to combat the high inflation that we're seeing? I'm not an economist so perhaps the question doesn't make sense.

dwater 4y ago
The Taylor Rule does that. "According to Taylor's original version of the rule, the nominal interest rate should respond to divergences of actual inflation rates from target inflation rates and of actual Gross Domestic Product (GDP) from potential GDP" https://en.wikipedia.org/wiki/Taylor_rule https://en.wikipedia.org/wiki/Taylor_rule Some argue that the reason we have seen such extreme speculative bubbles in recent history is because the Fed has no Taylor Rule-like systemic policy related to market factors. They are free to make policy completely divorced from the market. https://www.ft.com/content/ece92145-443d-4e94-bfa9-7fe06cb9c00a https://www.ft.com/content/ece92145-443d-4e94-bfa9-7fe06cb9c...
landemva 4y ago
On loans not backstopped by government, higher rates have been here for at least a year. The Fed rate rise is catching up to rates.
ItsMonkk 4y ago
Rates should ideally be set such that the increase(or decrease) of actual productivity matches the increase of the money supply. If people aren't taking enough loans, then the rates should be lowered. If people are taking to much loans, rates should be raised. The Fed's mandate does not do this, and we very often have way to much debt followed by short spikes of not enough debt, so we are destined to continue the boom and bust cycle. The way I see it the major problem happens to be with when we take out debt on zero-sum goods. When you take out debt and create something new with it, and that debt pays off, everything is fine. When you take out debt to buy something like land, it messes up a fundamental balancing force and speculation runs amok.

by axg11 4y ago

dwater 4y ago

The Taylor Rule does that. "According to Taylor's original version of the rule, the nominal interest rate should respond to divergences of actual inflation rates from target inflation rates and of actual Gross Domestic Product (GDP) from potential GDP" https://en.wikipedia.org/wiki/Taylor_rule https://en.wikipedia.org/wiki/Taylor_rule Some argue that the reason we have seen such extreme speculative bubbles in recent history is because the Fed has no Taylor Rule-like systemic policy related to market factors. They are free to make policy completely divorced from the market. https://www.ft.com/content/ece92145-443d-4e94-bfa9-7fe06cb9c00a https://www.ft.com/content/ece92145-443d-4e94-bfa9-7fe06cb9c...

landemva 4y ago

On loans not backstopped by government, higher rates have been here for at least a year. The Fed rate rise is catching up to rates.

ItsMonkk 4y ago

Rates should ideally be set such that the increase(or decrease) of actual productivity matches the increase of the money supply. If people aren't taking enough loans, then the rates should be lowered. If people are taking to much loans, rates should be raised. The Fed's mandate does not do this, and we very often have way to much debt followed by short spikes of not enough debt, so we are destined to continue the boom and bust cycle. The way I see it the major problem happens to be with when we take out debt on zero-sum goods. When you take out debt and create something new with it, and that debt pays off, everything is fine. When you take out debt to buy something like land, it messes up a fundamental balancing force and speculation runs amok.