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| Re: | Vizsla Breeder Wanted | | Ad: | I'm interested in this position http://lightmongers.co.uk/t-a-c.html vehicle secured loans On the other hand, the benefit of a positive rate of inflation comes in three places. Thefirst is the avoidance of the zero interest rate trap. The real interest rate in the United States has been negative in about a third of the years since World War II. The real after-tax interest rate, the rate at which corporations, for example, can borrow, has been negative in about three-quarters of the years since World War II. That couldn't happenif we had a zero rate of inflation. The nominali nterest rate cannot be negative. Negative interest rates may be a bad thing and our historical experience may be just an aberration, but perhaps negative real rates are a consequence of the risk associated with risky assets and the return on safe assets. If so, then an option would be lost to the economy if the rate of inflation were zero. I don't need to argue that the real after-tax rate of interest should always, or even most of the time, be negative. But if the real rate of interest should be negative only at certain times, we forgo that opportunity under a zero inflation rate. Potentially, rationing is much more serious than the triangles that are associated with a small tax distortion. If the equilibrium real rate of interest should be negative 1 percent and instead is 0 percent, the demand for capital would be significantly smaller than the supply.The potential consequences for economic stability would be severe at least enough of a risk that one would not want zero inflation.
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