Crazy Macroeconomics

Please, take the money via Greg Mankiw:

The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve's last policy meeting.

The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation.

A central bank cannot cut interest rates below zero. However, the staff research suggests the Fed should maintain unconventional policies that provide stimulus roughly equivalent to an interest rate of minus 5 per cent.

Comments

[SnoopyTheGoon]

I can easily imagine a dialog with my bank:

I: You know, I would like to take a $10K loan to buy some groceries and stuff...
Banker: Sure, man, and here is another $10K - on the house!
I: Mmm...

[Isaac Schrödinger]

True. Though, it's harsh times for those who save their money. The interest rates in Canada for savings accounts are barely above 1%. And, of course, the government taxes that measly interest income.

Anti-Mmm...