I’ve always had a problem with the Fisherian Theory of Interest, even before I really cared for Austrian economics. It emphasized the issue of inflation far too much and ignored what ‘real interest’ was. Recently though I’ve been rethinking my objections. Might I get everyone else’s thoughts? With …

Indeed, and this is how it’s taught in any undergraduate course in monetary theory. The Fisher effect (rr=rn-piee) says that the real rate of interest is entirely independent of monetary variables (not affected by either inflation or deflation).

I don’t know anything about Fisher. But, that is obviously true about interest rates adjusting downward for deflation. In the hearing with Ron Paul one of the boneheads was ranting and raving about how deflation would destroy people already in debt with adjustable rate mortgages. Either DiLorenzo or…

Why is it then that the mainstream is so scared of deflation if the real interest rate is independent of monetary variables?

Fisherian Theory of Interest

Economics Economics Questions

Caley_McKibbin February 11, 2011, 7:21pm 5

Probably related somehow to GDP as a measure of economic growth. I’ve been wondering that for 7 years.

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Fisherian Theory of Interest

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