22
May
2013
Mystery Right-Winger Sneaks Into an NPR Story on ZIRP
I was pleasantly surprised by this NPR story this morning, which said that the Fed’s zero-interest-rate policy was turning savers into collateral damage. But if you listen closely, around 3:30 you’ll recognize a familiar voice.
Sumner?
Nope… That would be the esteemed Russ Roberts. Go Russ!
Study this chart (MZMOWN vs FEDFUNDS)
http://research.stlouisfed.org/fred2/graph/?g=isL
and tell me what you think would happen if Fed Funds were increased.
This chart is even more disconcerting:
http://research.stlouisfed.org/fredgraph.png?g=iFV
The chart shows the savings rate went from 0 to 4% when the Fed Funds rate went from 5% to 0%.
Go longer term.
Savings rate went up quite a bit in the late 2000s because of the crisis.
The #1 problem facing the country is that rich people are not getting a high enough real interest rate when they lend money.
The #1 problem is the ultimate cause for this.
Which is?