Here's the interesting thing: the fact that QE and lowering interest rates almost to zero has worsened inequality, does not mean that raising interest rates will help reduce inequality.
With interest rates artificially low, consumers reduce savings in favor of consumption, and entrepreneurs increase their rates of investment spending.
Student debt is crushing the lives of millions of Americans. How does it happen that we can get a home mortgage or purchase a car with interest rates half of that being paid for student loans? We must make higher education affordable for all. We must substantially lower interest rates on student loans. This must be a national priority.
The real challenge was to model all the interest rates simultaneously, so you could value something that depended not only on the three-month interest rate, but on other interest rates as well.
There have been times when the Federal Reserve has restricted the money supply and raised interest rates to gain an end, which had much better been left to another Government agency or the Congress to attain. The country could have had lower interest rates without sacrificing anything else.
To finance deficits, the government must sell bonds to investors, competing for capital that could otherwise be used to invest in stocks or corporate bonds. Government borrowings raise long-term interest rates, stifling economic growth.
The expectation of gradual policy normalization should reduce the likelihood of outsized movements in interest rates.
With all this consumer debt, business debt, government debt, smaller movements in interest rates have a magnified effect. a small movement can tip the boat.
When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward.
The impact of low interest rates is broad and deep. Many Americans rely on interest income from their savings to help cover their cost of living.
The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates.
And so Fannie Mae produces very strong results for investors in - when interest rates are high and when interest rates are low, in recession and during booms.
Stock price multiples are negatively correlated with real interest rates. As interest rates rise, the market multiple will fall.
A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector. While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate.
Let's have honest interest rates. Let's let the free market set interest rates in that zone where supply of savings is matched up with demand for real borrowing for capital projects.
The media has brainwashed the electorate to expect the government to do something. The best economic policy of any government is to do nothing but reduce the size of the government, reduce the size of the laws, and reduce the size of regulations.