This global economy in the 2020s may look much like the previous decade in one important way: The era of rock-bottom interest rates will return.

• That's the takeaway from research presented at a conference hosted by the Fed this morning. It has big implications for the ultimate level to which Fed officials will need to tighten policy to cool the economy.

Why it matters: Global policymakers have debated what pandemic-era shifts would mean for how central bankers would need to set policy in the long term.

• But despite those unprecedented disruptions, historically low rates that prevailed in years past will eventually make a comeback.

What they're saying: "There is no evidence that the era of very low natural rates of interest has ended," New York Fed president John Williams said in a speech this morning.

• Williams spoke at a research conference dedicated to Thomas Laubach, an influential economist and adviser to both Powell and Powell's predecessor Janet Yellen.

How it works: The "natural rate of interest" is the short-term rate that neither stimulates nor slows the economy. At this level, the economy is in balance, with stable employment and inflation.

• Economists call it r* —or r-star —which, if nothing else, makes the concept sound very fun.
• Following the 2008 financial crisis, economists largely accepted that r* had fallen significantly, introducing a sustained period of lower rates.

Where it stands: After a COVID-related hiatus that complicated these estimates, the New York Fed has started to publish again. The upshot is that r* looks broadly similar to pre-pandemic times — both in the U.S. and in other advanced economies.

• In essence, once inflation returns to target, the Fed might eventually shift rates back down to levels seen before COVID-19.

Between the lines: If r* had gone up over the past couple of years, that might have implied that the Fed needed extra hikes to cool off the economy and slow inflation. The tightness of monetary policy is the difference between the Fed funds rate and r*.

The bottom line: These estimates remain uncertain. But at least one powerful policymaker believes the low-rate era will eventually return.

Never let a (banking) crisis go to waste. That's the message this week from a trio of superstar financial economists — Anat Admati, Martin Hellwig and Richard Portes — surveying the number of insolvent banks in America.

Why it matters: Historically, bank regulators haven't worried very much about solvency. But maybe now's a good time for them to start doing so.

The big picture: So long as bank assets mature at par, and are held to maturity, regulators aren't generally concerned if they fall in value in the interim.

• Banks exist to take interest rate risk and to lend through the ups and downs of the business cycle.

What they're saying: The authors write that the current crisis, where banks are sitting on some $2 trillion in unrealized losses, "looks like a replay of the Savings and Loans (S&L) crisis of the 1980s."

• "Ignoring insolvencies while also insuring deposits can lead to disastrous outcomes," they say.

The bottom line: The authors have a few suggestions for how to help solve the problem, including:

• Banks should be barred from paying dividends or buying back their stock, if they're insolvent on a mark-to-market basis.
• Regulators should encourage mergers of medium-sized banks in such a way that their balance sheets are strengthened.
• Banks should be forced to hold capital equivalent to 20% of their assets, making insolvency much less likely.