Plosser and interest rates
Posted by WARREN MOSLER on November 14th, 2008
“There are all sorts of technical ramifications when the fed funds rate goes towards zero. There are a lot of questions we’re going to have to grapple with going forward,” Plosser told reporters after a speech at the Economic Club of Pittsburgh. “You have to think about what this means for policy, market functioning, how we manage reserves.”
Yes, about time they thought about how reserve accounting works. They don’t have a clue. There are no operational issues.
But this does mean they may be reluctant to cut to zero.
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November 14th, 2008 at 7:53 am
I expect to hear, if they go to 0, (since they will functionally be “printing money” at that point), that hyperinflation is right around the corner…
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November 15th, 2008 at 8:18 am
suggestion: rather than ‘printing money’ think ‘reducing securities and increasing reserve balances’
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November 17th, 2008 at 3:08 pm
Which is exactly what is happening. A quantitative easing. Reserve balances now at $600 billion from a “normal” level of under $20 billion.
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