Until now, about the only thing good you could say about the Federal Reserve Board in recent years is that it hasn’t followed central banks in Europe and Japan by lowering interest rates below zero.
But that may be where we’re going next.
Fed Vice Chair Stanley Fischer told Bloomberg Surveillance last week that he and his Fed colleagues believe that negative interest rates are a legitimate tool for central bankers to use in their efforts to achieve full employment and economic health.
If by Fed colleagues, he means his imaginary friends, we should be okay. But if he means his gal pal Janet Yellen et al, look out below. Over the cliff we go.
Negative rates would be doubling down on failed policies. If you’re a political figure, like Fed Chair Yellen and her Fed brethren, it would be anathema to admit that you’re wrong about anything, so if something doesn’t work, you rationalize that you just didn’t pour enough gasoline on the fire and you pour more.
Anyone who has to pay for health insurance will recognize the doubling-down approach being used in the coming election by the Democrats who gave us Obamacare. The Affordable Care Act, to the surprise of no one who is not a Democratic member of Congress, has become unaffordable, with a majority of exchanges shutting down because they are losing money. But, with premiums increasing by about 30% this year in some states, Democrats believe the answer is more government control of healthcare. The insurers, of course, are the bad guys, because they are no longer willing to lose billions propping up Obamacare. (more…)