MONETARY POLICIES
now be necessary to set interest at
below zero. This idea was
lauded and expanded upon by other ivory-tower inside-the- box thinkers, including Paul Krugman.
Negative interest would mean
that banks would
charge
the depositor for holding his deposits rather than p a
y ing
interest on them. Runs on the banks would no doubt follow, but the pundits have a solution for that: move to a cashless society, in which all money would be electronic. “This
would
and would likely have made an exemplary Fed chair.
Maybe; but to ordinary mortals living in the less rarefied atmosphere of the real world, the proposal to impose negative interest rates looks either inane or
FX
Paul Craig Roberts, former Assistant Secretary of the Treasury, calls the idea “harebrained.” He
is economy. Roberts equally
skeptical of quantitative easing , the Fed’s other tool for stimulating the
points
to Andrew Huszar’s explosive N o v em b er 11th
Wall
make it i m p os sib le to hoard cash outside the bank,” wrote Danny Vinik in Business Insider, “allowing the Fed to cut interest rates to below zero, spurring people to spend more.” He concluded: . . . Summers’ speech is a reminder to all liberals that he is a brilliant economist who grasps the long- term issues of monetary policy
Negative interest rates would mean that banks would charge depositors for holding deposits rather than paying interest on them
like the next giant step toward the totalitarian New World Order. Business Week quotes Douglas Holtz-Eakin, a former director of the Congressional Budget Office: “We’ve had four years of extraordinarily loose monetary policy without satisfactory results, and the only thing they come up with is we need more?”
Street Journal article titled “Confessions of a Quantitative Easer,” in which Huszar says that QE was always intended to serve Wall Street, not Main Street. Huszar’s assignment at the Fed was to manage the purchase of $1.25 trillion in mortgages with dollars created on a computer screen. He says he resigned when he realized that
the real purpose of the policy was to drive up the prices of the banks’ holdings of debt instruments, to provide the banks with trillions of dollars at zero cost with which to lend and speculate, and to provide the banks with “fat commissions from brokering most of the Fed’s QE transactions.”
FX TRADER MAGAZINE January - March 2014 19
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