> The corollary of this is that any investment proposal with a plausibly positive expected return looks good. Very true. This causes massive investment to take

> The corollary of this is that any investment proposal with a plausibly positive expected return looks good. Very true. This causes massive investment to take place, increasing productivity, and pushing down the price of goods, because they are now cheaper to produce. In response to this price deflation, the central bank will lower interest rates further, increasing investment further, driving down prices further. And so on, and so forth, in a vicious circle. Japan has been in that circle for the past 20 years or so, being pulled deeper and deeper into deflation. We, in the West, are earlier in this process, but our destination is the same as that of Japan. Or at least, that's one explanation of what is happening. :) A theory put forth in this article: http://www.gold-eagle.com/article/economic-consequences-mr-greenspan http://www.gold-eagle.com/article/economic-consequences-mr-g...