ZIRP

Interest Rates and Inequality: A Shift in Perspective I have been thinking lately on how a high interest rate environment affects working class citizens and ultra-wealthy individuals differently. It started when I heard a quote from Warren Mosler, the founder of Modern Monetary Theory (MMT), describing a postitive interest rate policy as a “basic income for those that already have money”. I thought it was a pretty profound insight. How I Was Taught to Think About Interest Historically, I had been a fan of high interest rates. From a young age I was taught by my father to stay out of debt, pay off your credit card bill in full each month, and save your money, which is most certaintly solid financial advice. Because of that, I never feared high interest debt because I always knew to avoid it. And when it came to the other side of interest, the kind you earn, I was very excited by the idea of making a little extra just by letting my money sit. ...

Why the Fed Raises Interest Rates When the economy is heating up and inflation is above the 2% target, the Federal Reserve combats it by raising interest rates. Higher interest rates do a few things. On one hand, people are encouraged to save their money since it has a greater potential to earn interest. And on the other hand, people are discouraged from spending on credit and taking out loans since the interest on debt is higher. ...