Submitted by Taps Coogan on the 14th of May 2020 to The Sounding Line.

Enjoy The Sounding Line? Click here to subscribe.

Richard Fisher, former Dallas Fed President, recently spoke with CNBC’s Rick Santelli about the “enormous” damage that negative interest rates have caused in countries that have implemented them and his view that the Fed is essentially unanimously opposed to the policy.

 

Some excerpts from Richard Fischer:

“It’s not just Chairman Powell, it’s everyone on the FOMC that has clearly stated that they realize that there is more damage done by negative interest rates than positive impact…”

“Even before the Covid virus, the only index in the world that was lower than it was in 2009, before things turned, was the European banking index. (Negative rates) are a destructive mechanism and think of insurance companies. Already we are hearing reports that some insurance companies are unwilling to write new life policies…”

There has been a lot of talk about whether or not the US will adopt negative interest rates in the coming months given the massive contraction in the economy and given the fact that Fed Funds futures are pricing them in by this time next year. Fed Chairman Jerome Powell recently denunciated the policy, as have other current and former Fed officials and insiders like Richard Fisher.

While the denunciations are welcome, it is easy for everyone to oppose the idea of negative rights now while the Fed’s current tools appear to be ‘working.’ If the economy doesn’t recover expeditiously, I wouldn’t put a change of heart past the current Fed, which has already established a reputation for at least one pretty big ‘pivot.’

There is more to the interview, so enjoy it above.

Would you like to be notified when we publish a new article on The Sounding Line? Click here to subscribe for free.