ZIRP (permanent zero interest rate target by the Federal Reserve) is one of the three recommended policies of Modern Monetary Theory (MMT). Specifically, ZIRP is agreed upon by the following MMT core developers Warren Mosler, Mat Forstater, Bill Mitchell, and Scott Fullwiler. Although not against a zero rate, L. Randall Wray prefers it to be very low and near-zero.
This post contains sources confirming all the above.
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Disclaimer: I am a layperson who has studied MMT since February of 2018. I’m not an economist or academic and I don’t speak for the MMT project. The information in this post is my best understanding but I don’t assert it to be perfectly accurate. In order to ensure accuracy, you should rely on the expert sources linked throughout. If you have feedback to improve this post, please get in touch.
L. Randall Wray
L. Randall Wray prefers a near-zero, if not exactly zero rate: From the July, 2020 paper The “Kansas City” Approach to Modern Money Theory:
While I agree with this [ZIRP] as a general policy, I can also see a public interest in offering risk-free savings bonds to individuals, pension funds, and insurance companies. Only qualifying buyers would be allowed to hold them (with income and wealth caps for individuals and conditions placed on institutional holders) and the interest rate would be set by Congress or Parliament.
(I asked this directly of Wray in a not-yet-released interview for Activist #MMT, recorded on 8/2/2020.) It will be released to the public in early November, 2020 [and added here]. If you become a monthly patron of Activist #MMT, you can hear it right now. Hint, hint.)
Other MMT developers
- Warren Mosler and Mat Forstater authored the 2005 paper, The Natural Rate of Interest Is Zero.
- MMT’s founder, Warren Mosler, from this 2019 tweet (which is screenshot at the top of this post): “ZIRP is the base case for analysis. The burden of proof is on anyone who prefers another policy.” Also note that Warren considers ZIRP to be “a point of logic” as opposed to a policy recommendation.
- Bill Mitchell wrote a post in 2009 entitled, The natural rate of interest is zero!
- Scott Fullwiler wrote a 2014 post entitled, ’Debt-Free Money’ and ‘ZIRP Forever’