Eugene Coyle
Fri, 27 Aug 2010 12:30:46 -0700
This prompts my question: How did the Minneapolis Fed, in a liberal state, get to be such a haven for conservative economists? And by no means are they all ethnic Indians. Some Irish Catholics in there as well. Is the university econ deparment as conservative?
Gene Coyle On Aug 27, 2010, at 12:19 PM, raghu wrote: > First there was Kartik Athreya: > http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100006729/time-to-shut-down-the-us-federal-reserve/ > > Now, here is Narayana Kocherlakota. I have no idea how to make sense > of the following excerpt from a speech by this guy who is now the > President of the Minneapolis Fed (and soon to be FOMC member??). > http://www.minneapolisfed.org/news_events/pres/speech_display.cfm?id=4525 > ------------------------------------------------snip > Long-run monetary neutrality is an uncontroversial, simple, but > nonetheless profound proposition. In particular, it implies that if > the FOMC maintains the fed funds rate at its current level of 0-25 > basis points for too long, both anticipated and actual inflation have > to become negative. Why? It’s simple arithmetic. Let’s say that the > real rate of return on safe investments is 1 percent and we need to > add an amount of anticipated inflation that will result in a fed funds > rate of 0.25 percent. The only way to get that is to add a negative > number—in this case, –0.75 percent. > > To sum up, over the long run, a low fed funds rate must lead to > consistent—but low—levels of deflation. > > > > > > -raghu. > _______________________________________________ > pen-l mailing list > pen-l@lists.csuchico.edu > https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list pen-l@lists.csuchico.edu https://lists.csuchico.edu/mailman/listinfo/pen-l