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Most economists would also say that rising interest rates discourage investment, incentivize saving, and reducing debt. So who can say really? That's kind of
by bcheung 8y ago
Most economists would also say that rising interest rates discourage investment, incentivize saving, and reducing debt. So who can say really? That's kind of my point. So many interrelated factors. Impossible to isolate it to any 1 policy or event.
- elgenie 8y agoWhat economists say that increasing interest rates reduce either existing debt or public debt? The cost of borrowing is increased, so obviously there's less new private debt issued, but the cost of debt service for both private debt and, crucially, public debt increase, which means greater budget shortfalls and more (compounding) public borrowing. If your point is "well, the economy is a very complicated system", that's an argument for avoiding a large drastic action done to that system against the vast majority of expert economic advice, not for it. This tax cut wasn't even the typical "We need to do something. This is something!" fallacy, it was "We don't need to do anything. This is something!".
- dlp211 8y agoI'm not sure what economist your listening to that is telling you these things, but I suggest you stop listening to them post haste. You can't simultaneously discourage investment and increase savings. They are the same thing in economic parlance.
- bcheung 8y agoHow are they the same? Building up savings and paying down your credit cards are the exact opposite of investing. If you have to pay more on your mortgage and credit cards then that's less you can put into the stock market and invest in other things.
- elipsey 8y agoI think "Savings Rate" here is meant in the technical sense, not in the sense of household finances. It's an accounting identity in macroeconomics: https://en.wikipedia.org/wiki/Savings_identity https://en.wikipedia.org/wiki/Savings_identity