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Markets nowadays are fixated on how high the U.S. Federal Reserve will raise interest rates in the next 12 months.Given that the Fed may struggle just to get its base interest rate up to 2 percent over the coming year, there will be very little room to cut if a recession hits.Fed chair Janet Yellen tried to reassure markets in a speech at the end of August, suggesting that a combination of massive government bond purchases and forward guidance on interest-rate policy could achieve the same stimulus as cutting the overnight rate to minus 6 percent, were negative interest rates possible. For example, the Fed could follow the Bank of Japan's recent move to target the 10-year interest rate instead of the very short-term one it usually focuses on. The idea is that even if very short-term interest rates are zero, longer-term rates are still positive. This would leave the Fed extremely vulnerable to enormous losses should global forces suddenly drive up equilibrium interest rates, with the U.S. government then compelled to pay much higher interest rates to roll over its debt.The two best ideas for dealing with the zero bound on interest rates seem off-limits for the moment. Several central banks, including the Fed, have considered moving to a higher inflation target.
of a progressive consumption tax
And what about Rochester?
The case for a World Carbon Bank
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