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It's the other way around. A deflationary economy forces the feds to lower interest rates to encourage lending. We've had record breaking low inflation rates fo
by morio 9y ago
It's the other way around. A deflationary economy forces the feds to lower interest rates to encourage lending. We've had record breaking low inflation rates for a decade now. A 'healthy' inflation rate would be in the 3.5-4.0% range. Yes, money is supposed to lose value. If it did not no one would spend.
- adrianN 9y agoPeople would still buy things they need. They might not buy things they don't really need, but that doesn't sound like such a bad thing to me.
- megiddo 9y agoThat's nonsense. There's no objectively healthy inflationary rate. Low interest rates are the key factor in driving demand for borrowing. Low interest rates signal a healthy supply of savings from which to borrow. So, low interest rates naturally match a large supply to a healthy demand. Such a scenario would create a market for investment-led expansion. High interest rates signal the opposite. Either the supply of available savings is insufficient, or relative demand is high enough to drive out uncompetitive demands for savings.