Skip to main content

Suppose that widespread use of wireless technology to "pay by touch" of a cell phone or credit card reduces the demand for money. According to...

By liquidity preference theory (which is pretty solid, as economic theories go), reduced demand for money would come increased demand for savings, which would drive interest rates down. (It's not strictly true in every respect, but it can be useful to think of interest rates as like "the price of money"; if demand for money goes down, the "price" goes down---interest rates go down.)

If the Federal Reserve wants to maintain stable interest rates in this scenario, they should sell bonds, lowering the price of bonds, which raises the yield of bonds and thus raises interest rates. You can also look at it another way, which is that they take in money when they sell the bonds, reducing the money supply. Essentially they are taking up the excess money that was left over when people decided they no longer needed it because they could use mobile payments.

Comments

Post a Comment

Popular posts from this blog

Is there a word/phrase for "unperformant"?

As a software engineer, I need to sometimes describe a piece of code as something that lacks performance or was not written with performance in mind. Example: This kind of coding style leads to unmaintainable and unperformant code. Based on my Google searches, this isn't a real word. What is the correct way to describe this? EDIT My usage of "performance" here is in regard to speed and efficiency. For example, the better the performance of code the faster the application runs. My question and example target the negative definition, which is in reference to preventing inefficient coding practices. Answer This kind of coding style leads to unmaintainable and unperformant code. In my opinion, reads more easily as: This coding style leads to unmaintainable and poorly performing code. The key to well-written documentation and reports lies in ease of understanding. Adding poorly understood words such as performant decreases that ease. In addressing the use of such a poorly ...
Post a Comment
Read more

Is 'efficate' a word in English?

I routinely hear the word "efficate" being used. For example, "The most powerful way to efficate a change in the system is to participate." I do not find entries for this word in common English dictionaries, but I do not have an unabridged dictionary. I have checked the OED (I'm not sure if it is considered unabridged), and it has no entry for "efficate". It does have an entry for "efficiate", which is used in the same way. Wordnik has an entry for "efficate" with over 1800 hits, thus providing some evidence for the frequency of use. I personally like the word and find the meaning very clear and obvious when others use it. If it's not currently an "officially documented" word, perhaps its continued use will result in it being better documented.
Post a Comment
Read more