Thursday, June 7, 2012

Michael Sankowski - The Distributional Consequences of Monetary Policy

How can an economy grow in the long run if the fiscal stance does not rise?
One answer: Ever more debt.
How can we be assured of creating more debt? Lowering interest rates.
What happens when we lower interest rates? We make private sector owners of assets richer, due to the lower discount rate on their assets.
Since this path of ever more debt must continue to get the economy to grow, and the only way we’ve done this for 30 years is to lower interest rates, monetary policy makes asset owners richer.
Read it at Modern Monetary Realism
The Distributional Consequences of Monetary Policy
By Michael Sankowski

Must-read post of the day, maybe week. Brilliant.

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