Why are interest rates so low?

Post by [deleted] » Mon, Mar 30, 2015, 4:05 PM UTC

w0utert wrote: post #9

jacquesm wrote: post #5

Earlier quoted context omitted.

I guess it depends on which side you are thinking from in arguments like these. The interest rate a bank will give you depends on how much demand there is for the money that you are about to give that bank. If the bank has no way to make a profit on the money they give you because there is little demand then they will offer you a low interest percentage (or even none or a negative one). So yes, there is an oversupply…

The monetary system hasn't been about 'me and my savings', for at least 3 decades. Reasoning about banks, capital, supply/demand, return on investment, in terms of whether consumers spend their savings or leave it sitting on a bank account, will not make you any wiser about the state of the economy or our monetary system. Current rates are low because central banks everywhere are basically flooding the world with fre…

Post by tsomctl » Mon, Mar 30, 2015, 4:08 PM UTC

don_draper wrote: post #18

Another good question: Why are S&P500 stock dividends so low? The average S&P500 stock dividend yield is like 2%. In theory, you buy stocks to receive earnings. But if companies only give out a fraction of those earnings, you as an investor are not really getting much. So how can companies get away with a 2% dividend yield?

Post by kardashev » Mon, Mar 30, 2015, 4:20 PM UTC

Someone wrote: post #17

Mikeb85 wrote: post #11

Earlier quoted context omitted.

Because economic growth is the only way to pay off the massive amounts of debt that currently exist. The US needs to constantly grow and acquire more and more resources, labour and capital or else it will cease being the way it currently is...

Inflation also is a way to get rid of debt. A few years with 10% inflation would do wonders for the debt of most countries, provided that their debt is in their own currency.

Post by TheOtherHobbes » Mon, Mar 30, 2015, 4:23 PM UTC

vasilipupkin wrote: post #10

colund wrote: post #6

Why the obsession of economic growth? In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. This greed doesn't lead to less global warming or happier people. I think politicians and economists should start thinking about what actually makes people happy. Economics is efficient management of resources nothing else. Giving the population…

economic growth, albeit imperfect, is a measure of things getting better for society. So, we should worry about worldwide economic growth, but not necessarily Swedish economic growth. Another point is, lack of growth is a leading indicator of the situation getting worse in the future, even if it is pretty good now. So, yes, economic growth is an imperfect measure, but we have few if any alternatives to economic growt…

Post by sxcurry » Mon, Mar 30, 2015, 4:24 PM UTC

abfan1127 wrote: post #15

cynicalkane wrote: post #7

Earlier quoted context omitted.

This is a false understanding of how the supply and demand for money works. For example, news about QE was positively correlated with long term interest rates. The expectation of an increased future money supply tilted the balance towards the demand side in the present. Money is fundamentally an intertemporal thing, and we've known since the 1930s that the cute little supply-demand time-slice diagrams in textbooks do…

I'm not sure I follow. The Federal Reserve has manipulated the interest rates and money supply since 1913. The money market demand can't help determine the supply of money since the cost of money is the interest rate. Consumers aren't allowed to see if its worth while to save their money and earn interest rather than spend their money. Businesses can't see if its worth it to focus on current production or invest in i…