Stealth Monetary Tightening

Here’s a great chart from Brad DeLong that focuses on real (i.e., inflation-adjusted) interest rates rather than the nominal ones you hear about more frequently. Something really useful about this is that it highlights loud and clear the stealth monetary tightening that happened at the end of 2008.

Even more disturbingly, it looks like something similar has happened over the past couple of months. The striking thing about this is that in both cases it didn’t seem like anyone was really trying to systematically increase economy-wide borrowing costs. These weren’t overheating economies that needed to be calmed down. But nonetheless, in both cases money got tighter.