The interest rate needs to be at negative 6% “to supply the needed amount of monetary stimulus.”
As a result, “we are entering a world with interest rates that are far too high for the economy’s good,” Goldman Chief U.S. Economist Jan Hatzius wrote in a Jan. 16 research note.
As this Business Week writer tells us:
The solution is obvious: The Fed needs to deliberately raise the rate of inflation–maybe not all the way to 6%, but significantly above zero.
One way to do that is to print lots of money. The Fed can create money from thin air by purchasing assets such as Treasuries and mortgage-backed securities and paying for them by crediting the seller with newly created reserves at the central bank.
And you thought Krugman was a hoot!