24 Sep 2011

Caitlin Long Surprises Talking Heads By Suggesting Low Interest Rates Could Be Bad

Federal Reserve, Financial Economics 11 Comments

Caitlin Long works at Morgan Stanley and was at the Mises event in Vienna. She doesn’t really get a chance to say much in this clip. I mostly find it funny that the smartest guys in the room (well I don’t know if the camera person is a man) have never heard the idea that low interest rates could screw things up. They remind me of Guiliani in the 2008 debate with Ron Paul: “I’ve never heard that before.”

11 Responses to “Caitlin Long Surprises Talking Heads By Suggesting Low Interest Rates Could Be Bad”

  1. AP Lerner says:

    Funny, MMT’ers been saying this for decades…

    • Joseph Fetz says:

      That shouldn’t be too surprising, considering that artificially low interest rates have been known to be bad for a few centuries.

      I don’t remember the specifics, but I was reading some thoughts regarding usury (I think from the 17th century) and they were discussing limiting interest to something like 4 or 5 percent. Even then, the arguments against artificially low rates pointed out many of the problems that today’s economists talk about and in many cases they were correct.

      There must have been a memory hole between then and now, because I still keep hearing the same fallacious arguments in favor of artificially low rates that were being parroted back then; 4 centuries ago.

    • Bob Roddis says:

      Well, a broken clock is right twice a day. Do MMTers oppose artificially low interest rates for the right reason, that they are generally substantially lower than the real-world dynamic rates that would otherwise obtain in a world free of statists and funny money dilution and that they fatally impair proper determination of those essential real-world life-guiding rates?

      • MamMoTh says:

        There is no way to tell if interest rates are too low or too high.

        In any case, interest rates at which the private sector loans money is determined within the private sector itself. The interbank rate targeted by central banks is only a floor.

        That is why MMTers favour a 0% target interest rate and let the financial sector determine the interest based on risk assessment.

        • Mattheus von Guttenberg says:

          Interest actually serves a function more than calculating risk assessment. It’s the intersubjective social measure of time preference: The rate at which people prefer consumption sooner to later.

          A 0% interest rate throws all time markets into the Twilight Zone.

          • MamMoTh says:

            A 0% interest rate doesn’t throw any market into the Twilight Zone any more than a 50% interest rate.

            The point is that interest rates at which the private sector borrows is determined by the private financial sector, not by the government which only sets a floor with its target policy.

            So blaming the government for artificially low interest rates makes no sense at all. The government could only set interest rates too high.

        • Tel says:

          That is why MMTers favour a 0% target interest rate and let the financial sector determine the interest based on risk assessment.

          It’s a brilliant idea, so long as I get to be a member of this “financial sector” and benefit from the availability of infinite credit at no cost, I’m all for it.

          Hmmm, that might not be enough for the lifestyle that I’d like to become accustomed to, I might need a bailout or two when I demonstrate that I have no intention of paying anything back. Hope that’s fine with you guys.

          Tooodles.

          • MamMoTh says:

            Good thing that you concede the point about the 0% interest rate.

            Of course bailing out banks is an altogether different matter, the fact that you bring it up nevertheless is just the austrian standard strategy of mixing things up when clutching at straws.

            • Tel says:

              Well Paul Krugman told me that “Economics is not a morality play” so with that piece of wisdom I figured I’d rip it any which way I can do.

              • MamMoTh says:

                And by doing so you just exposed your inability to rip it in any way.

              • Rick Hull says:

                @MamMoTh

                Lovely identity attack, there. Stay classy.