Peter Fisher: Negative Rates Very Bad for Banking System

The transcript discusses the impact of negative interest rates and flat yield curves on the banking system, questioning the effectiveness of current economic theories. It highlights the shift from monetary to fiscal policy as the primary economic tool, with a focus on productivity, tax, and spending policies. The Bank of Japan's strategy of targeting the yield curve is examined, noting its potential to guide rates higher without disrupting the market.

What is one of the main concerns about negative interest rates and flat yield curves?

• They do not effectively stimulate credit.

• They stimulate excessive credit growth.

• They lead to high inflation rates.

• They are beneficial for the banking system.

What does the Federal Reserve's adjustment to the Fed funds target rate indicate?

• A decrease in the median forecast for 2016.

• A shift to a fixed interest rate policy.

• An increase in the median forecast for 2016.

• A complete removal of the target rate.

What is the potential shift in economic policy discussed in the second section?

• From regulatory to tax policy.

• From monetary to fiscal policy.

• From fiscal to monetary policy.

• From spending to regulatory policy.

What is the Bank of Japan's strategy regarding the yield curve?

• To eliminate the yield curve entirely.

• To maintain a flat yield curve indefinitely.

• To lock in the rate and guide it higher gradually.

• To lower the yield curve significantly.

What is a potential risk of central banks controlling economic prices?

• It causes a rapid increase in interest rates.

• It results in excessive market freedom.

• It can suffocate the banking system.

• It leads to uncontrolled inflation.