Tuesday , November 5 2024
Home / Mike Norman Economics / D. J. McGuire — Do Lower Interest Rates Actually Make Income Inequality Worse?

D. J. McGuire — Do Lower Interest Rates Actually Make Income Inequality Worse?

Summary:
In short, Liu et al present an entirely different set of expected consequences for extremely low interest rates. Instead of faster growth, they lead to slower growth. Instead of higher productivity growth, the lead to lower productivity growth. While in theory enabling government to address income inequality, they actually exacerbate it by encouraging market concentration and monopolization. More time and research is needed, of course, to see how much impact the market concentration effect truly has. More than a few economists will have questions about the paper, as it should be. However, at the very least, advocates for looser money in general – and MMT in particular – might want to take into account the strong possibility that their methods are running contrary to their avowed policy

Topics:
Mike Norman considers the following as important: , ,

This could be interesting, too:

Mike Norman writes Jared Bernstein, total idiot. You have to see this to believe it.

Steve Roth writes MMT and the Wealth of Nations, Revisited

Matias Vernengo writes On central bank independence, and Brazilian monetary policy

Michael Hudson writes International Trade and MMT with Keen, Hudson

In short, Liu et al present an entirely different set of expected consequences for extremely low interest rates. Instead of faster growth, they lead to slower growth. Instead of higher productivity growth, the lead to lower productivity growth. While in theory enabling government to address income inequality, they actually exacerbate it by encouraging market concentration and monopolization.
More time and research is needed, of course, to see how much impact the market concentration effect truly has. More than a few economists will have questions about the paper, as it should be.
However, at the very least, advocates for looser money in general – and MMT in particular – might want to take into account the strong possibility that their methods are running contrary to their avowed policy goals.
Ignores the role of functional finance.

Lower interest rates set by the Fed is an indication of substandard economic performance. The MMT remedy is not increasing interest rates but rather increasing targeted government spending and targeted tax cuts to stimulate lagging effective demand.

Bearing Drift
Do Lower Interest Rates Actually Make Income Inequality Worse?

D. J. McGuire
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

Leave a Reply

Your email address will not be published. Required fields are marked *