by To the Editor:
Lauren R. Rublin asserts that “the age of free cash is over” (“After the Deluge,” Roundtable Part I, Jan. 13). While not precisely certain what “free cash” is, I do anticipate “low cost cash” to predominant far into the long run.
Given the unprecedentedly excessive ratio of U.S. debt to gross home product, coupled with an unfavorable projected deficit trajectory, in the long term, some extent of interest-rate repression will certainly be pursued. The Federal Reserve’s personal long-run targets (2% inflation and a 2.5% impartial fed-funds fee) each implicitly counsel and admit this. At the identical time, nevertheless, the Fed’s 2.5% long-run impartial fee looks like a plugged-in quantity, chosen to be as little as attainable, whereas nonetheless producing a optimistic actual rate of interest, assuming the Fed hits its inflation goal. Most probably, over time, except Uncle Sam’s debt dynamics miraculously enhance, even-greater interest-rate repression will probably be wanted simply to keep up monetary stability, the Fed’s final job requirement. A considerably optimistic actual rate of interest for any prolonged interval is just unsustainable, and the Fed is aware of it.
