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The main question - when, if ever, will we return to a near zero interest world.

by psadri 4y ago

logisticpeach 4y ago
Disclaimer: UK centric thoughts (because that's where I live) Some projections are signalling deflation on the horizon. Given the brutal cost of living crisis, I suspect the government and BoE have grossly underestimated how hard things are getting (and how much harder they'll eventually get) for a giant slice of the population. I'm an absolute lay person here, but surely maintaining (relatively) higher interest rates whilst cutting government investment and raising the tax burden to post war highs during the worst cost of living crisis in a generation is an economic wrecking ball. If my naive take is anywhere close to sensible, I'd bet on a screeching u-turn and rates lowering again to try and rescue the situation. Side question: what are "normal" levels for interest rates? I hear people use this term all the time (usually while advocating for hawkish rises in some direct or implied way). Surely the interest rate mechanism is inherently dynamic and therefor entirely context specific, rendering the notion of a "normal" level useless.
- thoughtstheseus 4y ago
  Lower interest rates will create more inflation. The UK economy is overly “financialized”. It needs more workers, low cost energy, productivity improvements, and an overall improvement in its ability to supply goods and services.
time_to_smile 4y ago
Near zero interest is completely unsustainable and clear evidence of problems in the market. They have lead to unimaginable asset bubbles that we still haven't seen pop. There's been some research [0] that the last decade has seen the lowest interest rates in 5,000 years. We have been continually increasing solving market problems by just creating more credit but eventually you have to pay your debts. We're headed for trouble potentially bigger than anything we've seen before if we continue on this path. 0. https://www.wiley.com/en-us/A+History+of+Interest+Rates%2C+4th+Edition-p-9780471732839 https://www.wiley.com/en-us/A+History+of+Interest+Rates%2C+4...

The main question - when, if ever, will we return to a near zero interest world.

by psadri 4y ago

The main question - when, if ever, will we return to a near zero interest world.

Disclaimer: UK centric thoughts (because that's where I live) Some projections are signalling deflation on the horizon. Given the brutal cost of living crisis, I suspect the government and BoE have grossly underestimated how hard things are getting (and how much harder they'll eventually get) for a giant slice of the population. I'm an absolute lay person here, but surely maintaining (relatively) higher interest rates whilst cutting government investment and raising the tax burden to post war highs during the worst cost of living crisis in a generation is an economic wrecking ball. If my naive take is anywhere close to sensible, I'd bet on a screeching u-turn and rates lowering again to try and rescue the situation. Side question: what are "normal" levels for interest rates? I hear people use this term all the time (usually while advocating for hawkish rises in some direct or implied way). Surely the interest rate mechanism is inherently dynamic and therefor entirely context specific, rendering the notion of a "normal" level useless.

thoughtstheseus 4y ago
Lower interest rates will create more inflation. The UK economy is overly “financialized”. It needs more workers, low cost energy, productivity improvements, and an overall improvement in its ability to supply goods and services.

time_to_smile 4y ago

Near zero interest is completely unsustainable and clear evidence of problems in the market. They have lead to unimaginable asset bubbles that we still haven't seen pop. There's been some research [0] that the last decade has seen the lowest interest rates in 5,000 years. We have been continually increasing solving market problems by just creating more credit but eventually you have to pay your debts. We're headed for trouble potentially bigger than anything we've seen before if we continue on this path. 0. https://www.wiley.com/en-us/A+History+of+Interest+Rates%2C+4th+Edition-p-9780471732839 https://www.wiley.com/en-us/A+History+of+Interest+Rates%2C+4...