Thursday, October 13, 2016

Zero percent interest rates are on balance not positive for the economy

My view is that the U.S economy has been slowing down over the last 12 months and corporate profits have been coming down over the last 12 months, and so it’s not a good time to increase interest rate. 

On the other hand, the Fed went to almost zero interest rates in December 2008. So in December 2016, we are now eight years, at zero interest rates, the economy must be stinking if you can’t increase interest rates during eight years of an expansion so something is wrong. So my view is that they should have already increased it in 2011 and basically they should increase it now.

I think on balance, zero interest rate – and now there are many voices that propose negative interest rate – is rather negative for the economy.