What Trump Gets Right & Wrong about Interest Rates

At t he World Economic Forum in Davos, Switzerland, last week, President Donald Trump again talked positively about negative interest rates. That's not a very good idea considering negative interest rates are a warning signal of deflation, which can be as bad for an economy as runaway inflation. But Trump was right to herald this era of low nominal interest rates and inflation. If you want to understand how the Dow Jones Industrial Average has risen from a low of 800 to a high of 29,000 in four decades, look at the Federal Reserve's graph of the 10-year treasury rate showing the sharp and relentless decline in interest rates between 1980 and 2020. Think about how the world has changed. In 1981, 10-year Treasury bills paid an interest rate of 16%. Now they are at 2%. Read Full Article »