4 ms·

That was a lot of things you said but none of it really had anything to do with negative nominal interest rates and the zero lower bound problem.

by harryh 12y ago

mike_hearn 12y ago
What a weak answer. Sounds like you didn't read my post at all. There is no "zero lower bound problem". This "problem" exists only in the minds of central bankers and politicians. That is what I said already.
- harryh 12y ago
  Your comment focused on the time period in between the dot-com crash and the recent recession. At no point during that time period was ZLB a problem. ZLB because a problem after the recession when the economy was doing poorly and it was very difficult for the fed to increase the velocity of money. Further ZLB doesn't only exist in the minds of central bankers and politicians but also in the minds and research of economists who are, you know, experts on this sort of thing.
  - mike_hearn 12y ago
    It's just the latest iteration of a repeating cycle. Interest rates were historically low in the 2001-2008 period as well due to the Fed lowering them to try and fight off the popping of the dotcom bubble. Many argue that this led directly to the housing bubble by flooding the economy with excessively cheap cash. Most economists either work for universities or central banks. They are correct that it's a "problem" if your goal is to try and force people to spend money no matter what, against their better investment judgement. However as that goal is a bad one, there is in reality no problem.
    - harryh 12y ago
      Were interest rates held a bit too low a bit too long in the early half of the 2010s? Sure, it's possible. It's hard to know exactly what to do to keep the price of money exactly where you want it to be. And you're surely right that political pressures sometimes push things in a bad direction (though the Fed is fairly independent). However if you look back at, say, the 19th century you can see that the swings were much wilder and occurred much more often. We didn't yet know how to properly measure the strength of the economy and how to keep things running properly. Interest rates need to be set at something and we're actually pretty good at it now. The idea that it can be just set at some constant and never adjusted isn't supported by evidence and is believed by essentially no one credible.

That was a lot of things you said but none of it really had anything to do with negative nominal interest rates and the zero lower bound problem.

by harryh 12y ago

That was a lot of things you said but none of it really had anything to do with negative nominal interest rates and the zero lower bound problem.

mike_hearn 12y ago

What a weak answer. Sounds like you didn't read my post at all. There is no "zero lower bound problem". This "problem" exists only in the minds of central bankers and politicians. That is what I said already.

harryh 12y ago
Your comment focused on the time period in between the dot-com crash and the recent recession. At no point during that time period was ZLB a problem. ZLB because a problem after the recession when the economy was doing poorly and it was very difficult for the fed to increase the velocity of money. Further ZLB doesn't only exist in the minds of central bankers and politicians but also in the minds and research of economists who are, you know, experts on this sort of thing.
- mike_hearn 12y ago
  It's just the latest iteration of a repeating cycle. Interest rates were historically low in the 2001-2008 period as well due to the Fed lowering them to try and fight off the popping of the dotcom bubble. Many argue that this led directly to the housing bubble by flooding the economy with excessively cheap cash. Most economists either work for universities or central banks. They are correct that it's a "problem" if your goal is to try and force people to spend money no matter what, against their better investment judgement. However as that goal is a bad one, there is in reality no problem.
  - harryh 12y ago
    Were interest rates held a bit too low a bit too long in the early half of the 2010s? Sure, it's possible. It's hard to know exactly what to do to keep the price of money exactly where you want it to be. And you're surely right that political pressures sometimes push things in a bad direction (though the Fed is fairly independent). However if you look back at, say, the 19th century you can see that the swings were much wilder and occurred much more often. We didn't yet know how to properly measure the strength of the economy and how to keep things running properly. Interest rates need to be set at something and we're actually pretty good at it now. The idea that it can be just set at some constant and never adjusted isn't supported by evidence and is believed by essentially no one credible.