Tesco
The Idolatry of Interest Rates Part I
Report

The Idolatry of Interest Rates Part I

Chasing Will-o’-the-Wisp

James Montier
GMO, 2015
Get the Report

Read or listen offline

автоматическое преобразование текста в аудио
  • 0.5×
  • 0.75×
  • 1×
  • 1.25×
  • 1.5×
  • 1.75×
1×
автоматическое преобразование текста в аудио

Editorial Rating

9

Qualities

  • Innovative
  • Eye Opening
  • Engaging

Recommendation

Some economic assumptions are so deep-rooted that market experts, policy makers and economists forget to question their origins. One of these is the equilibrium real interest rate, the mythical rate at which the economy is in balance and to which central bankers adapt their policies in order to drive the economy faster or slower. Investment expert James Montier offers his iconoclastic but thought-provoking take on the notion, which getAbstract believes will intrigue – or infuriate – financial and economic professionals.

Take-Aways

  • Central bankers formulate monetary policies based on the equilibrium real interest rate – “the real interest rate consistent with full employment of labor and capital resources.”
  • Little evidence of such a rate exists, and it’s unlikely the notion helps monetary policy. Rather, it is an indicator of groupthink.
  • Changes in interest rates appear to pertain more to the decisions of central bankers than to the equilibrium real interest rate.

About the Author

James Montier is on the asset allocation team of the investment management firm GMO.

Comment on this summary or Начать обсуждение