Robert McTeer, former Dallas Federal Reserve President, believes that the central bank's aggressive monetary policies are to blame for today's economic struggles. McTeer highly criticized the Fed's ultra-loose monetary policy, noting that interest rates have been too low for too long. Many other economists agree with McTeer's views and believe that the FED waited too long to begin tightening things up. The cheap dollars flooding the market has only jaded to the downturn and has made the market "addicted to the liquidity." McTeer also believes that bad luck is partly to blame for our problems. China's slowing economy, which upset many of the global markets, prohibited the FED from tightening up. This delay also allowed other central banks to put in place negative interest rates, a policy that McTeer strongly disagrees with. Finally, McTeer believes that if the FED tries to implement negative rates, it would take years to "re-work" the system. It will be interesting to hear other viewpoints on this topic, as well as the Federal Reserve's response to this problem.
http://www.cnbc.com/2016/02/13/former-dallas-fed-president-calls-out-central-banks.html
Negative interest rates have been surfacing in the news a lot recently. From the Fed's perspective, Janet Yellen has stated that before negative interest rates would be fully established the US economy would have to take a drastic downturn. With this being said, it is still being discussed as a future option to stimulate the economy. However, in countries such as Japan who have implemented negative interest rates, there is no clear distinction whether or not this really has worked or not to stimulate the economy. I think it will be interesting to continue to watch China's effects on the world economy as well as to see if the Fed does indeed continue to raise interest rates or if they will stay at the levels they are now for the foreseeable future.
ReplyDeleteThe idea of negative interest rates does seem like a less than productive idea however the biggest takeaway from the proposal is what it sheds light on, that being the potential onset of a recession. Japan, as I recall from class, had also adopted the negative interest rate policy. This has affected faith in the economy, with a potential to increase expected inflation, hence translating into real inflation, if this were to be adopted here, I feel that it may have the same effect and be a catalyst to the predicted recession.
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