A negative interest rate imposed by a central bank on reserve balances of commercial banks is not an interest rate at all. It is a tax. As such, like all taxes, it transfers resources from the private sector to the government sector and has a contractionary effect on economic activity. The European central banks and the […]Read More
Commentaries by Atlas staff and those associated with the Sound Money Project.
By Dr. Lawrence White Let me welcome you all to the capital of Latin America. And when I say capital, I mean that much of the financial wealth of Latin America is held with banks and fund managers across the street, here in Miami. And therein lies a lesson in the results of unsound money. […]Read More
At the recent Jackson Hole meetings, John Williams, president of the Federal Reserve Bank of San Francisco, argued there has been a “significant decline in the natural rate of interest, or r* (r-star), over the past quarter-century to historically low levels.” Regular readers of this blog might recognize the view, as I have expressed it […]Read More
Many who are supportive of free markets blame central banks for the low interest rates that have prevailed since the end of the 2007-8 financial crisis. This is a mistake. Central banks can, in the short run and all else being equal, lower market interest rates through expansionary open market operations. But this ‘liquidity effect’ […]Read More
One of the open questions since the subprime crisis is whether or not the natural rate of interest is as low as the federal funds rate. The natural interest rate is the rate that equilibrates production over time. However, this concept is more subtle than output being equal to potential output– it also implies that production is distributed […]Read More
This article appeared in the June 2016 issue of Globe Asia. On June 23rd, the voters in the United Kingdom (UK) turned a collective thumbs-down on the European Union (EU). The Brexit advocates – the ones who had had enough of the EU’s mandates and regulations – won the day. But, this is only the first […]Read More