Diane Swanbrow, Susan Rosegrant and Eva Menezes put together the newsletter for the Institute for Social Research at the University of Michigan. They put together a nice summary of my interview with Dylan Matthews of the Washington post “Can we get rid of inflation and recessions forever? (My direct answer to that question is in my companion post.) Here is the summary:
How would you feel if you put $1 into the bank, and when you took it out a year later, it was only worth 95 cents? Probably like it’s not a good time to be saving money. And that’s exactly why ISR researcher Miles Kimball argues that negative interest rates should be one tool available for economic policymakers. In a Nov. 18 Q&A in The Washington Post, Kimball acknowledged that high interest rates often are appropriate, encouraging people and businesses to save. But when economies are in recession, companies become reluctant to borrow or invest and people shy away from buying automobiles and houses, exactly the kinds of activities needed to jump start the economy. Allowing negative interest rates could help spark those activities and more quickly return the economy to health. Moreover, Kimball contends that if governments did most transactions electronically, it would be easier to manage negative interest rates. “Anything you can do to firm up the legal status of electronic money as the real thing makes it easier to do what it takes to go to negative interest rates,” Kimball said.