I don't know how one could look at this and still advocate for a permanent ZIRP. Chicago pension fund in big trouble due to ZIRP and current revenues for essential services have to be reprogrammed into the pensions so local government services suffer or are eliminated.
Its the same story all throughout the country.
I don't know how one could look at this and think permanent ZIRP is a good policy to propose. Its either cold or stupid or both.
.@FitchRatings downgrades #Chicago, cites Illinois Supreme Court ruling on pension reform https://t.co/bviAlDkTEI— John Tillman (@JohnMTillman) March 29, 2016
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And Rahm Emanuel's austerity and privatizations really helped, too!
Interest in the public debt is essentially fiscal financing of non-government. Why not just do it directly and be done with it. More targeted and more efficient.
Set the overnight rate to zero, issue only short term bills and do fiscal directly through appropriation via the democratic process.
No reason to do it through an indirect subsidy, which is what interest on government securities amounts to, since it is not needed operationally. Use Occam's razor.
Too bad, it's a great city. The problems run deep and the extent of their book-cooking goes way beyond what has been disclosed. I don't think it is a crime though for politicians to lie and deceive investors, and misrepresent investments, fudge financial statements and such. I think they get a free pass until the merry-go-round stops.
Well Tom there is currently $18T in ERISA accounts that says otherwise... can't pretend that stuff is not there .... plans have been made for it... have to deal with it....
Matt
This is the problem with using monetary policy. The interest rate is both something people think of as a saving rate (which they want to be high) and something people see as a borrowing rate (something they want to be low) There is an inherent tension when using interest rates. The people who want a higher low risk saving rate are at odds with those who want a low borrowing rate....... and there is no King Solomons solution either, not without a fiscal element.
Part of the answer is a robust social safety net that doesn't leave peoples incomes exposed to the vagaries of life like illness/job loss/ work hour reduction, which is the primary reason people save in the first place. If someone never had to worry that illness would mean bankruptcy or that hours reduction meant foreclosure we could do things a lot differently.
I agree with Mosler for the most part that a ZIRP would eliminate a lot of worthless activities.
Spot on Greg. Looking for solutions in the wrong places...
Well we have $18T put away that assumes some sort of substantial positive risk-free rate of return in the actuarial projections... to just blow this off is either irresponsible or stupid or both...
"Chicago pension fund in big trouble due to ZIRP and current revenues for essential services have to be reprogrammed into the pensions so local government services suffer or are eliminated."
Or perhaps you finally come to the conclusion that private pensions are a con-trick - being as they are outsourced tax collection systems. Current pensions are paid for by the savings (often compulsory) of the current population, plus whatever income they can extract from their assets or central government.
The correct pension is a federal one. You take your pot and give it to the federal government and they provide you with a pension for life. That also has the advantage of reducing the deficit - since it destroys excess savings.
Ultimately private pensions cannot provide security in retirement. It is a job creation scheme for the finance sector and it should be scrapped.
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