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Why are interest rates so low?

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Re: Why are interest rates so low?

#91

Post by baddox »

enraged_camel wrote: post #73
jseliger wrote: post #25

Earlier quoted context omitted.

Why the obsession of economic growth? One alternate question might be, "At what point in time do you consider the economy to have become 'big enough' that you don't care about growth?" Today? 2000? 1990? 1970? The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. It seems reasonable to imagine t…

You can have technological, scientific and cultural advancement without economic growth. Building more shopping malls out in the suburbs leads to growth, but it doesn't advance society.

Lots of people love living in suburbs and visiting shopping malls. You'll have to define "advancing society."

Re: Why are interest rates so low?

#92

Post by collyw »

bwanab wrote: post #37
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…

You make a very good point. However, the obsession with economic growth itself isn't the problem - it's how economic growth is measured. As an example, if a hurricane sweeps through Florida doing billions in damage, Florida is surely worse off, but because of the rebuilding activity that follows, it will register significant growth. As you state, we need to think about what makes people happy. Economics is a great to…

This reminds me of when Windows Vista (or was it Windows 7) came out, Microsoft claimed it would lead to more growth, through all the upgrades that would need done. So more work needing done leads to more "growth". There is something backwards in that thinking to me.

Re: Why are interest rates so low?

#93

Post by colund »

cgh wrote: post #66
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…

"housing prices are all time high." This is not a good thing and I'm not sure why you seem to think it is. You talk about happiness - one way to help the "happiness quotient" is affordable housing.

It's true that all time housing prices is not a good thing. But low interest rates helps keep the Swedish housing bubble growing. Low interest rates encourages people to invest big but when the interest rates go back up people risk getting in financial trouble.

Re: Why are interest rates so low?

#94

Post by msandford »

dageshi wrote: post #80
saosebastiao wrote: post #77

Interest rates are low because inflation is low and central banks are irrationally terrified of even mild deflation, fearing some sort of hypothetical deflationary spiral (despite a complete lack of precedent). And since the rate of technological progress is increasing , and technological progress creates deflationary pressure , they have to work extra hard to keep up. Tell me, when was the last time you stopped buyi…

Didn't that deflationary spiral happen in Japan? The lost decade?

Hasn't Japan been printing tremendous amounts of money to try and prevent it, with no end in sight? At what point does that get discredited?

Re: Why are interest rates so low?

#95

Post by collyw »

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…

"Why the obsession of economic growth?"

Because the economy is essentially a Ponzi scheme.

Re: Why are interest rates so low?

#96

Post by mox1 »

It is a little scary to me that Ben is basically saying the "Wicksellian interest rate" is the best way to steer our economy, so we strive to use that....

To rely so heavily on theory to guide actual policy is at minimum reckless in my opinion.

I hope there are / were other voices in the room with alternative opinions, not just PhDs giving him hourly ideal Wicksellian rate updates....

Re: Why are interest rates so low?

#97

Post by rohansingh »

bwanab wrote: post #37
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…

You make a very good point. However, the obsession with economic growth itself isn't the problem - it's how economic growth is measured. As an example, if a hurricane sweeps through Florida doing billions in damage, Florida is surely worse off, but because of the rebuilding activity that follows, it will register significant growth. As you state, we need to think about what makes people happy. Economics is a great to…

The example you gave about Florida is actually very old, and is summed up in the "parable of the broken window": http://en.wikipedia.org/wiki/Parable_of_the_broken_window

As you can see in the Wikipedia article, there are actually many different interpretations and views on whether or not that rebuilding adds value to the economy.

Re: Why are interest rates so low?

#98

Post by twobits »

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…

"Why the obsession of economic growth?"

Because central banks (CB) print money out of thin air. That "money" is debt. You print 100, you owe 110 counting interest. How can you pay the 10, if you only printed/exists, 100? You can't. You, me, everyone, is a debt slave. "Times are good" = CBs print a lot of money (out of thin air). A lot of non existant interest too, but you don't notice, cause more money/debt is printed. "Times are bad" = Enough is enough, CBs stop printing, you have to pay/give back, what doesn't exist, ie the interest. Defaults are unavoidable, and the people on top, pick up whatever they want on pennies to the dollar.

To put it simply: You print 100 out of thin air. There is no more money in the world. Next year, you owe 110. Where can you find the 10? (Spoiler: You can't.)

Re: Why are interest rates so low?

#99

Post by enraged_camel »

baddox wrote: post #91
enraged_camel wrote: post #73

Earlier quoted context omitted.

You can have technological, scientific and cultural advancement without economic growth. Building more shopping malls out in the suburbs leads to growth, but it doesn't advance society.

Lots of people love living in suburbs and visiting shopping malls. You'll have to define "advancing society."

>>You'll have to define "advancing society."

Actually, if you follow the discussion, it has already been defined in the comment I responded to:

>>The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture.

What is being implied here is that we want economic growth because we don't want to be limited in tech / culture. I simply pointed out that this is a false association.

Re: Why are interest rates so low?

#100

Post by rgross »

mox1 wrote: post #96

It is a little scary to me that Ben is basically saying the "Wicksellian interest rate" is the best way to steer our economy, so we strive to use that.... To rely so heavily on theory to guide actual policy is at minimum reckless in my opinion. I hope there are / were other voices in the room with alternative opinions, not just PhDs giving him hourly ideal Wicksellian rate updates....

Huh? It's reckless to guide economic policy by economic theory? How else do you propose the Fed sets interest rates, a Ouija board?
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