Narayana Kocherlakota is the President of the Federal Reserve Bank of Minneapolis. Here's what he said in a speech in Frankfurt the other day:
"Increasing the supply of assets available to investors would push downward on debt prices, and so upward on the long-run neutral real interest rate..."
First of all did Kochelakota ever look at a chart of the historic relationship between Federal debt and interest rates? Well, here it is below. By the way, I got this chart FROM THE FED.
Secondly, is he aware that it's the FED THAT SETS RATES? Even if the government expanded its debt, the Fed would have to at least signal higher rates before it could happen simply because the Fed would be buying all bonds, notes and bills at higher prices (lower rates) to defend its target. There'd be no sellers at lower prices (higher rates). NONE!
Third: higher levels of Federal debt entails more deficit spending, which is exactly what we need. Is that what he is advocating? If so, why doesn't he come out and say it?
What idiots. I really can't take it anymore.
