The MMT view of ZIRP (permanent [near-]zero interest rate policy)

ZIRP (permanent zero interest rate target by the Federal Reserve) is one of the three recommended policies of Modern Monetary Theory (MMT), as confirmed in the top-most quote in this post. 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 one very low and near-zero. Confirmation from all the preceding economists can be found below.

[Go back to the table of contents. These resources were created by Activist #MMT, the podcast (Twitter, Facebook, web, please consider becoming a monthly patron). Last updated September 4, 2020.]

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.)

Warren Mosler and Mat Forstater

Warren Mosler and Mat Forstater authored the 2005 paper, “The Natural Rate of Interest Is Zero.”

Warren Mosler

A quote from MMT’s founder, Warren Mosler: “ZIRP is the base case for analysis. The burden of proof is on anyone who prefers another policy.” (This is the tweet screnshot at the top of this post.)

Note that Warren considers ZIRP to be ”a point of logic” as opposed to a policy recommendation.

Bill Mitchell

Bill Mitchell wrote a post on August 30, 2009 entitled, “The natural rate of interest is zero!”

Scott Fullwiler

Scott Fullwiler wrote a July, 2014 post entitled, “’Debt-Free Money’ and ‘ZIRP Forever'”