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Trying to wrap my head around "the demand for money is low, the price goes down". Genuinely curious.

• lowpro 9y ago
  If an entity doesn't see a good way to invest money, they won't borrow money to make money. This is what they mean when 'the demand for money is low'. If the government borrowed money, they would not make as much on that money as the interest payment to who they borrowed from, so they never borrow the money. This has the overall effect of reducing money demand, reducing the premium to get that money (the interest rates continue to drop). Everyone though 0% interest was a hard line and you couldn't go lower, until negative interest rates were introduced to try and reverse this trend, which it largely hasn't.
• thesumofall 9y ago
  What part of it? You are a bank and try to earn as much as possible with the money your customers gave you. However, states, consumers, and businesses don't invest as much as they used to / don't borrow as much money. What do you do as a bank? You lower your interest rates to try to attract at least some customers. Combine that with exceptional supply due to quantitative easing and you have what you have right now
• tehabe 9y ago
  Why is that so complicated? If the demand is low but the supply is high, prices usually decrease.
• golergka 9y ago
  "Money" is cash now. Price is the interest.
• hl5 9y ago
  Lower interest rates cause people to wait for a lower rate, higher rates cause people to take out loans before the rate goes up again. CBs did the worst possible thing with no historic evidence it would work, as usual.