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>Low real interest rates are really, really, bad. You can repeat that as often as you want, but it simply isn't true. It's post hoc, ergo propter hoc reasonin

• crdoconnor 11y ago
  >You can repeat that as often as you want, but it simply isn't true. It's post hoc, ergo propter hoc reasoning: we see low rates in times of trouble, therefore low rates caused the trouble? It simply is true, although not because of that reasoning. It's a stupid/evil reaction to an over-leveraged economy that has come crashing down. The presumption built into the idea that lowering interest rates would help is twofold: A) If you just started getting people into even more debt then the economic woes would fix themselves because people will start spending again. As if more debt were the solution to too much debt. Hence Japan is still terrified of raising rates 20 years later. Because ramping up debt is not a solution to too much debt. B) If people's asset prices are now worth more (houses, etc.) then they'll feel richer and spend more. Except that only applies to a minority. The majority don't have much in the way of significant assets and are instead getting royally screwed by rentiers capitalizing on those higher asset prices.