Friday, February 19, 2010

The discount rate should be zero!



There's no reason to have a penalty attached to the discount rate if its intended function is to ensure the integrity of the payments system at the margin. Banks are quasi-public entities that fund themselves with taxpayer guaranteed deposits and their assets are regulated. Penalizing banks for borrowing at the discount window under that institutional structure makes no sense.

The only reason the Fed moved the rate up is because it caved in to the pressure of critics who say that it needs to "exit" from all the "stimulus" it has provided. What a joke.

I don't know who is more wimpy...Obama or Bernanke.

Wimps at the controls.

Dick Cheney for president! "Deficits don't matter!" You go, Dick!

2 comments:

Tom Hickey said...

Right. "Reagan proved that deficits don't matter" but he only proved it for Republicans. It's not true for Democrats, however, but the reasons are so economically complex they cannot be explained. :)

Mike Norman said...

And Republicans still will not concede that. Reagan ran the highest deficits in the post WWII period until now. And even now, when you exclude TARP and the bailouts, the deficit is only several tenths of a percent higher than they were under Reagan.