Jim Grant on negative interest rates and the ghost of Irving Fisher

It's tempting to try to imagine how [Irving] Fisher would react to the negative interest rates of 2019.  He certainly had nothing against innovation.  One can imagine him falling in with the new thinking, or even, perhaps, leading it.  He was an inveterate tinkerer and an ardent reflationist.

If his analysis was correct, Fisher wrote in 1933, "it is always economically possible to stop of prevent such a depression simply by reflating the price level up to the average level at which outstanding debts were contracted by existing debtors and assumed by existing creditors, and then maintaining that [price] level unchanged."

The mind - at least our mind - boggles at the otherworldliness of this casual prescription.  "Simply by reflating?"  The dubious record of so-called quantitative easing suggests there would be nothing simple about it.  As to the unintended consequences of this prospective intervention, Fisher is silent.

~ Jim Grant, "The best economist on the lowest rates," Grant's Interest Rate Observer, July 26, 2019