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On Room For Creativity In Monetary Policy?

March 16th, 2015 · 2 Comments
Macroeconomics · Policy

I can’t decide whether this is more or less ridiculous than negative interest rates for dealing with a liquidity trap…

(One nitpick: Technically, savings is what funds investment, so it doesn’t generally make sense to think that they move in opposite directions as suggested above. That said, if you define “saving” as putting money in banks or government securities and “investment” as private-sector investment, then the statement is pretty reasonable.) On a practical level, however, this can only work if people don’t recognize Janet Yellen, since they need to get scared and run away rather than be all “OMG it’s Janet Yellen, you’re so cool, can I take a selfie with you?” Fortunately (in this context and probably no other), Yellen’s celebrity doesn’t appear to be a limiting factor:

The survey showed 70% of those polled don’t know or aren’t sure who Ms. Yellen is. In contrast, just 1% had never heard of former president George W. Bush.

When it comes to the Federal Reserve as an institution, 42% said they had a neutral view, while 30% had a somewhat or very positive view and 20% had a somewhat or very negative view. Just 8% didn’t know the name or weren’t sure what it was.

Yellen shouldn’t take it entirely personally, though, since, as of last year, one in six Americans thinks that Alan Greenspan is still in charge of the Fed. Yellen and Bernanke need to go commiserate over some cocktails- and Yellen should pick up the tab since Yellen’s a millionaire and Bernanke couldn’t refinance his mortgage. =P

Tags: Macroeconomics · Policy

2 responses so far ↓

  • 1 Jeff L // Mar 16, 2015 at 4:45 pm

    “That said, if you define “saving” as putting money in banks or government securities and “investment” as private-sector investment, then the statement is pretty reasonable.”

    I can agree with that. I wish that more economic pundits were clear on whether they mean “physical investment” or “financial investment” when they talk about investments. When you consider that we have multiple decade long periods of financial investments merely bidding up the P/E, Price/rent, and Bond price/interest dollars ratios, simply referring to both with the name “investments” is what the logicians refer to as a category error.

    I will agree that negative interest rates, even though they seem real enough, don’t have a lot of legs to get us out of our “situation”.

  • 2 Blackwood // Apr 15, 2015 at 5:39 pm

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