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> That’s true only in a very narrow sense. I love his complete willingness to mislead. What an asshole. If a bank can borrow from the Fed at a lower rate, the
by jack9 12y ago
> That’s true only in a very narrow sense.
I love his complete willingness to mislead. What an asshole.
If a bank can borrow from the Fed at a lower rate, they refinance their existing debt almost immediately. This trickles down to smaller institutions without the ability to borrow directly from the Fed. It's not true that the Fed sets the interest rate in a narrow sense, it's true in a very strict and immediate sense.
- aros 12y agoWhy did you take one sentence out of context and pretend to refute the entire article?
- dap 12y agoHe doesn't say that the Fed doesn't set the nominal rate in the short term. As I understood it, the post argues that it's unsustainable for the Fed to attempt to set the nominal short-term rate to something different than the medium-term real rate, over which it has no control. Did you skip the whole part about what happens if the Fed sets the nominal short-term rate lower or higher than the medium-term real rate?