Move Over Entrepreneurs, Make Way for Speculation!

Move Over Entrepreneurs, Make Way for Speculation!

Central bank apologists assert that zero interest will help the economy. It hasn’t yet, and it never will. However, the main concern by both Fed defenders and foes alike is the worry that prices might rise. Well, prices aren’t rising now. So the former are smug and the latter are frustrated.

They miss the real harm of zero interest.

Yield Purchasing Power: $100M Today Matches $100K in 1979

Yield Purchasing Power: $100M Today Matches $100K in 1979

I wrote a story about poor Clarence who retired in 1979, and even poorer Larry who retired last year. I created these characters to challenge the notion of calculating a real interest rate by subtracting inflation. The idea is that the decline of a currency can be measured by the rate of price increases. This price-centric view leads to the concept of purchasing power—the amount of stuff that a dollar can buy. It’s the flip side of prices. When prices rise, purchasing power falls.

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