Since the real economy (manufacturing / information) isn't growing, the money flows into assets (eg real estate or stock bubbles) When there's zero interest, it

Since the real economy (manufacturing / information) isn't growing, the money flows into assets (eg real estate or stock bubbles) When there's zero interest, it exacerbates the problem, because if you've got capital, it's impossible to find anywhere to invest it to get a return. A nifty chart that shows this idea in a 3D graph: http://www.nytimes.com/interactive/2015/03/19/upshot/3d-yield-curve-economic-growth.html?_r=0 http://www.nytimes.com/interactive/2015/03/19/upshot/3d-yiel... Hence you're incentivised to put it into assets. Basically you're not seeing assets (houses/stock) going up in value, you're seeing money go down in value. My theory is that it has become far too easy (profitable) for middlemen to extract that value from people when they are attempting to invest. Maybe some academics should look into expanding the Principal-Agent problem[1] into the Brokerage-Agent problem. Most brokerages don't care whether the value of an asset goes up or down, only that the trade takes place so that they get their cut. This is what exacerbates the problem, not zero interest. Realtors are especially adept at convincing buyers to bid up properties based on their future value. Securities brokers know that when fear and hype push volume in either direction, it has been a good day; it doesn't really matter if it ends red or green because they get cut whenever trades take place, regardless of whether people are cashing in or cashing out of the market. Quantitative-based profiteering on volatility. [1]https://en.wikipedia.org/wiki/Principal-agent_problem https://en.wikipedia.org/wiki/Principal-agent_problem