The Fed Chair, Dr. Janet Yellen, has advised that she plans to see the short term Fed borrowing rate rise from .25 percent to 2.5 percent within about two years. This would mark the end of a fantastically long period of the Fed keeping interest rates at essentially zero.
My mind goes back to the great economist, Edward F. Denison, of the Committee for Economic Development. Dr. Denison wisely told my pop that if an interest rate goes from 1 percent to 2 percent, that’s not a rise of 1 percent. That’s a rise of 100 percent.
So, Mrs. Yellen apparently has in mind a rise of roughly 1,000 percent for the short-term rate.
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