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For the layperson (like me), here are some explanatory articles. How low interest rates can hurt competition, and the economy (https://review.chicagobooth.edu/e
by BlackVanilla 6y ago
For the layperson (like me), here are some explanatory articles. How low interest rates can hurt competition, and the economy (https://review.chicagobooth.edu/economics/2019/article/how-low-interest-rates-can-hurt-competition-and-economy https://review.chicagobooth.edu/economics/2019/article/how-l...), Low Interest Rates, Market Power, and Productivity Growth (https://bfi.uchicago.edu/insight/research-summary/low-interest-rates-market-power-and-productivity-growth/ https://bfi.uchicago.edu/insight/research-summary/low-intere...).
Here are some questions this conjured for me
1) Do you think low interest rates are the primary cause of long-term sluggish growth in the last decade or so?
2) What role has quantative easing had in accelerating this and should central banks stop quantative easing programmes?
3) Despite low growth (if the claim is true), have low interest rates been a necessary evil to avoid the 2008 Financial Crisis turning into a depression?
- PaulHoule 6y agoLooking at 2008 as a turning point obscures the fact that interest rates have gone down relentlessly since 1982. Interest rates got cut in the crisis before the 2008 crisis and they will get cut in the next one, even if the cut is 'crazy QE'. Cutting interest rates in a crisis is normal, what is abnormal is that they can't raise them afterwards. One aspect of that is the debt ratchet. One reason why house prices went up post 1982 is the falling interest rates. For a given monthly payment you can afford a higher cash price at lower interest. If students loan interest is lower you can afford a higher tuition bill. If you believe interest rates are wacky, it follows that people paid wacky prices for everything expensive for the last 20 years. If interest rates go up in the slightest, the bankruptcies start.