<p>Economists do not argue that allowing the Fed to operate at the ZLB will cause a cessation of savings. Instead, some (many?) economists argue that when the Fed operates at the ZLB it loses the ability to further manipulate interest rates to achieve some desired result regarding inflation/unemployment. If investment remains stagnant when interest rates are at zero, what else can the Fed do to encourage investment? If investment remains stagnant, what are the implications for new job creation rates and unemployment rates? </p>

<p>Asking when the Fed should increase interest rates will, at best, elicit responses that include some amount of subjectivity. At worst, you will receive opinion-based arguments. That question can't be any more definitively answered than "why should/shouldn't the Fed explicitly operate using Taylor's rule?".</p>

<p>This response is broad because your question is broad. I am also answering a slightly different question than what you asked (more specifically, I am trying to concentrate on your sentence "what is wrong with the Fed implementing zero-interest policy") and have done so in a very general way.  </p>

<p>If you fix your question a bit then this community will be able to provide much better responses. I hope this might help some. </p>

CC BY-SA 3.0
2015-01-07T18:56:46.930Z
Please keep comments about the question in the comments, though I appreciate that you're trying to help. Answers should only answer the question and not critique it.
Jason Nichols
CC BY-SA 3.0
2015-01-07T23:05:13.267Z
My experience with this site has been almost entirely with the mathematics section. This is a somewhat common practice there. I won't do it here if that is community consensus.
123
CC BY-SA 3.0
2015-01-06T20:10:38.740Z
2015-01-06T20:10:38.740Z
123
<p>Under the Zero interest-rate policy, people will keep spending spending money &amp; there is no savings.  I believe saving is good. So,</p>

<p><strong>What is the serious problem when Fed implements Zero interest-rate policy?</strong></p>

<p>&amp; </p>

<p><strong>When should Fed increase their rate?</strong></p>

CC BY-SA 3.0
2015-01-06T12:33:14.413Z
Could you provide some evidence that there are no savings.
Lumi
CC BY-SA 3.0
2015-01-06T16:37:18.503Z
There is indeed savings, I recently deposited money into a CD account and did not spend it.  Are you talking about a particular model?
Bryce
CC BY-SA 3.0
2015-01-06T17:04:56.283Z
Off topic because a) the answer is model-dependent and no model is specified; b) no model in which savings fall to zero is likely to be interesting; c) "I believe saving is good" is as relevant as "I like my eggs poached".
Steven Landsburg
<financial-economics>
What is the serious problem when Fed implements Zero interest-rate policy?
Tom
# What is the serious problem when Fed implements Zero interest-rate policy?

(Asked by: username_0 on 2015-01-06)

Under the Zero interest-rate policy, people will keep spending spending money & there is no savings. I believe saving is good. So,

**What is the serious problem when Fed implements Zero interest-rate policy?**

&

**When should Fed increase their rate?**

**Tags:** financial-economics

> **Comments:**
> **username_1**: Could you provide some evidence that there are no savings.  
> **username_2**: There is indeed savings, I recently deposited money into a CD account and did not spend it.  Are you talking about a particular model?  
> **username_3**: Off topic because a) the answer is model-dependent and no model is specified; b) no model in which savings fall to zero is likely to be interesting; c) "I believe saving is good" is as relevant as "I like my eggs poached".  

---

## 1 answers

### Answer by username_4 on 2015-01-06. Score: 1

Economists do not argue that allowing the Fed to operate at the ZLB will cause a cessation of savings. Instead, some (many?) economists argue that when the Fed operates at the ZLB it loses the ability to further manipulate interest rates to achieve some desired result regarding inflation/unemployment. If investment remains stagnant when interest rates are at zero, what else can the Fed do to encourage investment? If investment remains stagnant, what are the implications for new job creation rates and unemployment rates?

Asking when the Fed should increase interest rates will, at best, elicit responses that include some amount of subjectivity. At worst, you will receive opinion-based arguments. That question can't be any more definitively answered than "why should/shouldn't the Fed explicitly operate using Taylor's rule?".

This response is broad because your question is broad. I am also answering a slightly different question than what you asked (more specifically, I am trying to concentrate on your sentence "what is wrong with the Fed implementing zero-interest policy") and have done so in a very general way.

If you fix your question a bit then this community will be able to provide much better responses. I hope this might help some.

> **Comments:**
> **username_5**: Please keep comments about the question in the comments, though I appreciate that you're trying to help. Answers should only answer the question and not critique it.  
> **username_4**: My experience with this site has been almost entirely with the mathematics section. This is a somewhat common practice there. I won't do it here if that is community consensus.  

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