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In theory, a fall in nominal interest rates below the real rate of return of capital should spur investment, since entrepreneurs can borrow funds at a low rate
by lottin 5y ago
In theory, a fall in nominal interest rates below the real rate of return of capital should spur investment, since entrepreneurs can borrow funds at a low rate to expand production capacity or start new businesses and obtain a higher rate of return. The reality is we don't see much investment going on, and at some point the ECB will have to face up to the fact that the low interest policy doesn't work.
- imtringued 5y agoThe reality is that people invest abroad. After all, there is no rule that they must invest in their own country. > at some point the ECB will have to face up to the fact that the low interest policy doesn't work. And repeal the zero lower bound or what? Face up to what? Interest rates will be low as long as supply of labor outstrips demand for labor.
- snidane 5y agoLow ingerest rate resulting in economical growth is a dogma recognized across economic schools, which fails to materialize empirically. Look up Richard Werner on this. The only growth that is observed is businesses which are serving the bubble. Eg. construction industry having a boom as well as cryptocurrency startups.