« Trickle Down, Starve the Beast, Supply-Side, and Sound Money Fantasies | Main | Links for 11-12-15 »

Wednesday, November 11, 2015

'A Debate With Bernanke Over the Fed’s Easy Money Policies'

William Cohan ("a former senior mergers and acquisitions banker") argues with Ben Bernanke over the Fed's interest rate policy. These people (the one who isn't Bernanke in this case) are nuts:

A Debate With Bernanke Over the Fed’s Easy Money Policies: By the end of our recent conversation, Ben S. Bernanke ... and I had a gentleman’s bet. I believe the easy money policies he ... put in place while serving as Fed chairman starting in 2008 ... will lead inevitably to a near-term financial crisis; he thinks that idea is beyond ridiculous...
“The low rate of interest isn’t something that God gave us,” he explained. “It’s something that is a feature of the economy. There’s a lot of savings in the world looking for a relatively small number of good-return investments, and so the equilibrium real interest rate in the economy is very, very low.” ...
There is a target interest rate that is consistent with full employment. “And for most of the recovery,” he said, “that number was actually negative. Any economist can explain why ..., “policy did lower the interest rate ... but even after lowering them, they were still too high ... because of the zero lower bound. ...
He said the blame for the extended period of low interest rates belonged with Congress... “Go complain to Congress because the fiscal policy turned very contractionary, which meant the Fed had to bear the entire burden of creating a recovery,” he continued. “If fiscal policy had been more balanced, then we could’ve had the same recovery with higher interest rates. ...Congress said essentially, ‘The Fed will take care of it,’ then the Fed could use the only tool it had.” ...
But he will owe me a beer when the next financial crisis hits, sooner than anyone would like.

Related to the post before this one:

He said that it was “a red herring” that quantitative easing or the zero interest rate policy helped make the rich richer...
“It’s been going on for a long time,” he said. “It’s been increasing since the 1970s. ... The Fed’s effects on inequality are modest and temporary, and the fact that the Fed’s policies created jobs means that the absolute benefits for the working class are very substantial.”

    Posted by on Wednesday, November 11, 2015 at 12:10 PM in Economics, Monetary Policy | Permalink  Comments (66)


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.