Again, this seems like a case of talking past each other. There is not much in particular that I see to disagree with in this Steven Williamson post. Though admittedly I skimmed it.
As a minor point I think Williamson suggests the Fed has no tools except expanding the stock of currency but of course the Fed can alter its balance sheet and by extension private balance sheets.
My key disagreement is this: In so many words Williamson suggests that the problem is not that the risk-free interest rate is too high but that the liquidity premium is too high. Thus we could not in theory solve this problem by driving down the risk free rate of interest.
This strikes me as wrong for two reasons.
1) Why? Or So What? If we drive down the risk-free rate then we drive down the rate + liquidity premium. Because I…
View original post 100 more words
Utopia, you are standing in it! 
Recent Comments