I have an idea that may be a new innovation not thought of yet.
While watching economic news tonight, and hearing about the Fed’s influence over the economy by this one simple mechanism, interest rates, I had an epiphany.
Has anyone ever proposed that the fed have more than one interest rate to influence the economy? I can’t find anything about this simple idea online.
I know the supply of money flows through the central banks into major cities in the U.S., but what if we could set different rates for different sectors of the economy or type of borrowers? Maybe it could also be location-based, where an inner city that's distressed versus a booming area would have a lower interest rates offered from the central bank and made available to the local banks, to encourage growth in one area, while at the same time, discouraging inflation or over-spending in another by offering these areas higher rates. I can imagine a mathematical matrix of interest rates, even being governed by the Blockchain instead of a governing body (okay, too radical perhaps). With this system in place, online national banks would provide interest rates based on the area you live in along with your credit history. It's one more metric.
I pose the question, is this a new idea? It's hard for me to believe it is. Why does the fed have just one rate for influencing the entire economy? In this modern day of computers, it certainly could be managed. For instance, having different interest rates for small business borrowers who spur growth while dampening inflationary pressures in the auto or housing industries with higher rates seems to make a lot of sense to me. Why can’t the Fed govern multiple interest rates?
I graduated from the University of Colorado with a BA in Economics, taking some graduate-level course, so perhaps I am going back to my roots.
If anyone has any thoughts that could enlighten me on this subject, I would greatly appreciate it if you would write them in the comments below. Maybe this is an old idea. I just don’t know. Seems to me like it could have headed off a lot of the economic woes in South America being experienced right now, or prop up "lazy cities" as the video below suggests. It also could be the answer to the depleting job market and talk about needing a Universal Basic Income.
What do you think? Leave your comments below.
Note regarding the laziest cities video referenced above: Cleveland is Rated #10. 🙁