A Quote by Paul Krugman
What the Depression teaches us is that when the economy is so depressed that even a zero interest rate isn't low enough, you have to put conventional notions of prudence and sound policy aside.
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The world economy is in a nosedive, and understanding what I call "depression economics" - the weird world you get into when even a zero interest rate isn't low enough, and a messed-up financial system is dragging down the real economy - is essential if we're going to avoid the worst.
Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
Monetary policy is like juggling six balls... it is not 'interest rate up, interest rate down.' There is the exchange rate, there are long term yields, there are short term yields, there is credit growth.
Our tree is actually a tree of the short-term interest rate. The average direction in which the short-term interest rate moves depends on the level of the rate. When the rate is very high, that direction is downward; when the rate is very low, it is upward.
I've always believed in expansionary monetary policy and if necessary fiscal policy when the economy is depressed.
The reality is the most important thing that can be done are these permanent changes like to the tax code, reduction of government spending. These are the things that pop up in economy and move it in the right direction, start to make it an economy that is moving because of the money in the private economy. When you think about it, when the Fed is lowering an interest rate, what it's doing is it's creating more liquidity. It's putting more money into the economy. The same thing happens when you reduce the tax except if happens from physical policy.
When they so-called 'target the interest rate', what they're doing is controlling the money supply via the interest rate. The interest rate is only an intermediary instrument.
The only number that would ever be enough is 0. Zero pounds, zero life, size zero, double-zero, zero point. Zero in tennis is love. I finally get it.
Near-zero policy rates that may be considerably expansionary in an economy with high inflation could be contractionary when inflation is too close to zero, or worse, deflation has set in.
First, pay off your high-interest-rate debt. If you have student loan debt - that's low interest rate; that has a tax benefit - you can leave that out. A mortgage can be an OK one. Credit card debt is poison. That needs to be paid off right away.
Depression is not caused by a chemical imbalance in the brain, and it is not cured by medication. Depression may not even be an illness at all. Often, it can be a normal reaction to abnormal situations. Poverty, unemployment, and the loss of loved ones can make people depressed, and these social and situational causes of depression cannot be changed by drugs.
Monetary policy transmission encompasses the whole continuum of interest rates; of course, the central bank only determines the overnight policy rate.
No one will lend at a negative interest rate; potential creditors will simply choose to hold cash, which pays zero nominal interest.
When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly.
The insurance companies do not refer to the key policy rate when they send their statements. We can only control that rate. Long-term interest rates are determined largely by global financial markets.
What is any political campaign save a concerted effort to turn out a set of politicians who are admittedly bad and put in a set who are thought to be better. The former assumption, I believe is always sound; the latter is just as certainly false. For if experience teaches us anything at all it teaches us this: that a good politician, under democracy, is quite as unthinkable as an honest burglar.
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