Wednesday, December 23, 2015

Winterspeak — Fed Raising Rates


MMT-consistent analysis.

Wingerspeak.com
Fed Raising Rates
Winterspeak

10 comments:

Unknown said...

Since higher interest rates mean more interest income, shouldn't the Fed sharply raise interest rates when unemployment is high?

MRW said...

Hunh? The interest income does not go to the unemployed.

No sane businessman is going to hire unemployed workers unless there are sales to justify it.

Unknown said...

The interest income might lead to higher sales, which would reduce unemployment.

ciaran said...

It's one effect but come on its hardly the only or main effect .

Peter Pan said...

Both positive and negative effects?

MRW said...

"@Blogger Tyler Healey said...
The interest income might lead to higher sales, which would reduce unemployment."

The interest income goes to the holders of treasury securities, and creditors (commercial banks etc). Not the debtors, especially those who are unemployed and can't get loans.

Further, if the cost of borrowing goes up, which it does with higher interest rates, then the hoi polloi are even less inclined to borrow.

70% of al spending in this country--the people who buy the goods produced or imported--are households. If the households are out of work, or their two-income families reduced to one, then where are you going to get the sales that will justify business owners hiring or rehiring? Why would a business owner take out a loan for capital expenses if there are no sales to justify it?

Matt Franko said...

What if the 70% household spending was a function of the other 30%?

MRW said...

OK. What if?

Matt Franko said...

Then the 70% would be the DEpendent variable.... Dependent on the complementary 30%... So whatever was going on in the 30% (including interest income) would be causal to the other 70%... "Govt is not a household"

MRW said...

Why would the business sector be causal, which is part of that 30%? Understand the govt sector, but why the biz sector?