What does 2017 have in store? Our attention will be directed toward the Fed and other central banks, as the world’s financial elites try to navigate through increasingly volatile waters. Central bankers don’t have a strong track record for seeing bubbles, but it’s hard for them to ignore growing skepticism from both the public and even their own governments. Blinded by a fundamental misunderstanding of interest rates, they find themselves in a perilous position: either bring about the next bust by unraveling past policy, or risk losing the public's confidence by failing to raise interest rates. This is why now, more than ever, it’s time to legalize competing currencies and offer the failing central bank model some real competition.
On MisesWeekends, returning guest Dr. Patrick Barron, a longtime professor in the graduate school of banking at the University of Wisconsin joins Jeff to discuss negative interest rates. How and why would interest rates ever be negative, when everyone prefers current consumption to future consumption? Can the "natural" or market rate of interest ever be negative? What's going on in Europe that would make negative-rate government and corporate bonds attractive to investors? Will the ECB be forced to raise rates back into positive territory if Janet Yellen continues to raise the Fed Funds Rate here in the US? And will Congress resist steady rate hikes that could radically spike its annual budget outlay for debt service?