10 Reasons: Why Fed Should adopt Zero Interest Rate Policy?

As news continues to pour in that Fed Rates are likely to go near or at zero interest rate level, we think that Fed. should get out of its stunned posture and take more drastic measures like bringing the rates down to zero percent levels. These are indeed difficult times and magnanimity of problems require Fed. to take magnanimous steps. It should act fast and give the economy the much needed fiscal jolt. Unfortunately, Fed has a history of doing too little and too late.

After detailed analysis of issue and reading the material suggested below, we have come to conclusion that there was never before a time, so good ,for adopting zero interest rate policy. we put forth our set of 10 reasons why Fed. should go for it.

1. Zero interest rate will encourage investment throughout the economy.
2. Zero interest rate will make capital purchases financially more attractive.
3. Zero interest rates will encourage people to Invest rather than Lend.
4. It will create more jobs as people will make investments in securities or real plant and equipment.
5. Zero interest rates are expected to take gas out of Commodities and Gold.
6. Probably it is the best tool to get out of depression. (We used it in 1930’s)
7. Liquidity trap is just a theoretical construct, not an actual phenomenon.
8. Remove the burden on tax payers to bailout banks and stock markets.
9. Bank of Japan has successfully used this model for decades to support Its Fiscal System.
10. Fed can adopt “Non-Standard” fiscal measures to stimulate growth.

Further Reading and References(open in new window)

• http://en.wikipedia.org/wiki/Zero_interest_rate_policy
• http://economics.about.com/cs/interestrates/a/zero_interest.htm
• http://www.imf.org/external/pubs/cat/longres.cfm?sk=15474.0
• http://www.financialstandard.com.au/news/view/24185/
• http://www.mmhabits.com/what-if-the-fed-cuts-to-0-the-zero-interest-rate-policy/
• http://en.wikipedia.org/wiki/Liquidity_trap

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