Hard Money Senators' Big Contradiction

A blog about business and economics.
Nov. 14 2013 11:46 AM

Hard Money Senators' Big Contradiction

3464062
ALLENTOWN, PA - APRIL 24: Just stick the cash in a mattress! Saving!

Photo by William Thomas Cain/Getty Images

Watching Janet Yellen's confirmation hearings it's no surprise that the bulk of the critical questions she's receiving are coming from the Republican side or that they reflect a preference for tighter monetary policy.

What is interesting, however, is that the Hard Money Caucus can't quite decide what the problem with current monetary policy is. Bob Corker, for example, complained that low interest rates and quantitative easing are artificially boosting the stock market and exacerbating inequality. Then the next Republican questioner was Pat Toomey, and he complained that low interest rates and quantitative easing are punishing savers.

Advertisement

I don't think either of those is really true. But what I'm sure of is that you can't simultaneously boost the stock market and punish savers. Now it's true that if saved money and invested it all in long-dated bonds, then low interest rates has been bad for you. But if you saved money and invested it in a house, then low interest rates have been good. It's also been good, per Corker's point, if you invested your money in stocks. My 401(k) is way up—three cheers for QE.

And that's the point. Monetary stimulus is intended to boost investment. Firms find it easier to borrow cash to invest in increased capacity. Demand for real estate and commodities rises. Share buybacks look less desirable as a use of retained corporate profits, so firms become more likely to invest in increased capacity. Some portfolios benefit and other portfolios suffer. In particular, if you take steps to boost investment and growth then growth-oriented portfolios do better.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Students Aren’t Going to College Football Games as Much Anymore

And schools are getting worried.

Two Damn Good, Very Different Movies About Soldiers Returning From War

The XX Factor

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Politics

Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

Why a Sketch of Chelsea Manning Is Stirring Up Controversy

How Worried Should Poland, the Baltic States, and Georgia Be About a Russian Invasion?

Trending News Channel
Sept. 19 2014 1:11 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Weigel
Sept. 20 2014 11:13 AM -30-
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 21 2014 12:43 PM Watch Rachel Dratch and Tina Fey Do a Second City Sketch in 1997
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 21 2014 8:00 AM An Astronaut’s Guided Video Tour of Earth
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.