Wednesday, 28 May 2014
Zero bound nonsense.
Kenneth Rogoff suggests negative interest rates would be desirable in some circumstances. Negative interest is crazy: it makes it profitable to engage in negative output. E.g. I borrow at minus 10%, buy something that declines in value at 5% a year in real terms and then sell a year later at a profit. Raving bonkers. Lunatic.
Only professional economists could think up a way of bringing about negative output, i.e. wealth destruction.
However it should be said in defence of the enormously stupid Kenneth Rogoff that there are plenty of other enormously stupid people in the economics profession, particularly at Harvard where Rogoff is based.