{"id":12214,"date":"2015-08-19T21:59:22","date_gmt":"2015-08-20T01:59:22","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=12214"},"modified":"2015-08-19T21:59:22","modified_gmt":"2015-08-20T01:59:22","slug":"public-debt-and-the-long-run-neutral-real-interest-rate-narayana-kocherlakota","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2015\/08\/19\/public-debt-and-the-long-run-neutral-real-interest-rate-narayana-kocherlakota\/","title":{"rendered":"Public Debt and the Long-Run Neutral Real Interest Rate | Narayana Kocherlakota"},"content":{"rendered":"

Extract from a speech by Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, in Seoul, South Korea on August 19, 2015: <\/p>\n

There has been a significant decline in the long-run neutral real interest rate in the United States over the past few years. <\/p>\n

\"10-Year<\/p>\n

This decline in the long-run neutral real interest rate increases the future likelihood that the FOMC will be unable to achieve its objectives because of financial instability or because of a binding lower bound on the nominal interest rate. Plausible economic models imply that the fiscal authority can mitigate this problem by issuing more public debt, although such issuance is not without cost. It is, of course, the province of the fiscal authority to determine whether those costs are worth the benefits that I\u2019ve emphasized…<\/p><\/blockquote>\n

How we got in this mess<\/h2>\n

There are two critically important price signals in the economy — the interest rate and the exchange rate. Tampering with them encourages distortions, leading to instability.<\/p>\n