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That's why they said "IF the way out". It seems like OP is asking for exactly the same numbers you are - do we need to invest more in making sure things are ava

That's why they said "IF the way out". It seems like OP is asking for exactly the same numbers you are - do we need to invest more in making sure things are available/produced? Or will more money just lead to more demand in ways that make things worse like how you've described.

runnerup 4y ago
Honestly, I do agree with the GP. > Do you have numbers that show that's what people do when interest rates are low? I don't have numbers - but my suspicion is that they mostly just speculate on asset prices. I don't know either. I agree with their analysis that we've had an exuberance of speculation on rising assets during a time of unprecendented low interest rates. It just also seems unlikely that rising interest rates will facilitate additional investment towards critical shortages. Maybe this is a problem for Congress more than the fed, I don't know. Would love to hear others opinions.
- noirbot 4y ago
  Yea, it strikes me as the sort of situation where monetary policy does somewhat intentionally live in a vacuum compared to more general policy. Changing the interest rate doesn't dictate what companies or people do with the money they're borrowing/not lending at that rate. The Fed generally has pretty coarse tools. Whether the increased monetary supply is spent on "good" or "bad" things is up to more general policy choices made in other parts of the government.
  - onlyrealcuzzo 4y ago
    > Whether the increased monetary supply is spent on "good" or "bad" things is up to more general policy choices made in other parts of the government. If we want to "make money" and "increase GDP" - lowering interest rates does appear to do that. But there's no reason you can't "make money" and "increase GDP" and also actually lower productivity and living standards. Imagine an economy where 90% of the economy is people buying land from each other on debt. If suddenly the price of money drops 50%, and people can afford to pay 50% more for land (and do) - all things being equal - GDP increases by 50% * 90% = 45%. If everyone realizes how much money they can make doing this instead of whatever the other 10% of the economy is - say actually working the land to farm apples - then real productivity can drop 100% to 0 - and you still "increase GDP" and people still "make money". At the same time - maybe everyone dies of starvation shortly thereafter? I'm not arguing this is actually happening - especially to this degree - but it is easy to see that it is at least possible*.
    - imtringued 4y ago
      Well, what you are describing is actually what happens during economic depressions. People who need to eat don't have money so economic activity is diverted from producing food even though any sane individual would think that producing enough food is the highest priority for any civilization. What I personally find strange is that there are economic schools of thought that just axiomatically conclude that nothing is wrong and these people are rightfully starving even though there are economic schools that prevent starvation and end up with superior output.

runnerup 4y ago

Honestly, I do agree with the GP. > Do you have numbers that show that's what people do when interest rates are low? I don't have numbers - but my suspicion is that they mostly just speculate on asset prices. I don't know either. I agree with their analysis that we've had an exuberance of speculation on rising assets during a time of unprecendented low interest rates. It just also seems unlikely that rising interest rates will facilitate additional investment towards critical shortages. Maybe this is a problem for Congress more than the fed, I don't know. Would love to hear others opinions.

noirbot 4y ago
Yea, it strikes me as the sort of situation where monetary policy does somewhat intentionally live in a vacuum compared to more general policy. Changing the interest rate doesn't dictate what companies or people do with the money they're borrowing/not lending at that rate. The Fed generally has pretty coarse tools. Whether the increased monetary supply is spent on "good" or "bad" things is up to more general policy choices made in other parts of the government.
- onlyrealcuzzo 4y ago
  > Whether the increased monetary supply is spent on "good" or "bad" things is up to more general policy choices made in other parts of the government. If we want to "make money" and "increase GDP" - lowering interest rates does appear to do that. But there's no reason you can't "make money" and "increase GDP" and also actually lower productivity and living standards. Imagine an economy where 90% of the economy is people buying land from each other on debt. If suddenly the price of money drops 50%, and people can afford to pay 50% more for land (and do) - all things being equal - GDP increases by 50% * 90% = 45%. If everyone realizes how much money they can make doing this instead of whatever the other 10% of the economy is - say actually working the land to farm apples - then real productivity can drop 100% to 0 - and you still "increase GDP" and people still "make money". At the same time - maybe everyone dies of starvation shortly thereafter? I'm not arguing this is actually happening - especially to this degree - but it is easy to see that it is at least possible*.
  - imtringued 4y ago
    Well, what you are describing is actually what happens during economic depressions. People who need to eat don't have money so economic activity is diverted from producing food even though any sane individual would think that producing enough food is the highest priority for any civilization. What I personally find strange is that there are economic schools of thought that just axiomatically conclude that nothing is wrong and these people are rightfully starving even though there are economic schools that prevent starvation and end up with superior output.