Low interest rates are usually attributed to low inflation, weak economic growth and super easy monetary policy. But there's another deep-seated factor that doesn't get much attention: demographics.
Sentiment: NEGATIVE
The impact of low interest rates is broad and deep. Many Americans rely on interest income from their savings to help cover their cost of living.
Low interest rates benefit individuals or investors who own or want to buy assets; in that regard, they disproportionately benefit wealthier Americans.
The crisis and recession have led to very low interest rates, it is true, but these events have also destroyed jobs, hamstrung economic growth and led to sharp declines in the values of many homes and businesses.
It would be helpful if someone would lay out exactly the economic mechanism that gets us from yet lower interest rates to actual economic activity.
Low interest rates are a big opportunity for investment. But the issue is that this money should go to the real economy, not the financial economy.
Lower interest rates are usually considered good for stocks because they lower the cost of borrowing and make bonds a less attractive alternative investment.
Monetary policy is like juggling six balls... it is not 'interest rate up, interest rate down.' There is the exchange rate, there are long term yields, there are short term yields, there is credit growth.
Interest rate cuts have an effect in stimulating an economy by directly or indirectly making someone, somewhere, spend more than they otherwise would. That extra spending increases demand and ensures that we all carry on with work to do, without us having to slash our prices or our wrists.
Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
The Fed's ability to raise and lower short-term interest rates is its primary control over the economy.
No opposing quotes found.