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Why are interest rates so low?

brookings.edu

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Re: Why are interest rates so low?

#111

Post by sumedh »

dgregd wrote: post #53
dualogy wrote: post #34

Earlier quoted context omitted.

> Why the obsession of economic growth? Easy. Essentially unknowable/unpredictable future growth expectations/extrapolations were already baked into present-day voter promises, welfare obligations and many bank/insurance/pension calculations, plus current "financial asset" valuations. Now the big scramble is on to will said growth assumptions into actually happening, lest "all bets will be off", literally.

> many bank/insurance/pension calculations It will also clearly show how big banks, HFT companies are making huge profits. They are slowly pulling money out of your pension fund. Banks do not produce, they have no income from dividends, so how they earn?

> Banks do not produce, they have no income from dividends, so how they earn?

They provide capital without which you cannot produce anything.

They make money by difference of rates between deposits and lending.

Re: Why are interest rates so low?

#112

Post by nwah1 »

jellicle wrote: post #19

It is worth also reading Paul Krugman's take on this blog post: http://krugman.blogs.nytimes.com/2015/03/30/ben-bernanke-blo... In particular Krugman notes that the average retiree has basically nothing in interest earnings. The median retiree has a bit more than $100K in total net worth (most of it in housing), and earns bupkis in interest.

Inequality is also explained, to a shocking extent, by housing. And housing is a euphemism for land.

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/03/19/m...

Rent rises whenever things improve, but those returns don't help everyone, nor do they help the people responsible for the improvements. Rather, they help the select fortunate landholders who are profiting by owning prime locations, particularly urban locations.

Re: Why are interest rates so low?

#113

Post by harperlee »

twobits wrote: post #98
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 printe…

Assuming that you can create value of 11 or more with that 100, someone can exchange 11 of their future / current / past effort (with money), (s)he pays you, you pay your debt, and you now have 1 or more to be at the other side of the transaction.

Unless you state that all value in the world is fixed, a zero sum game, that argument of the "Money as debt" documentary doesn't really hold water.

Re: Why are interest rates so low?

#114

Post by mox1 »

rgross wrote: post #100
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?

I meant by a single economic theory / equation...

Re: Why are interest rates so low?

#115

Post by aros »

jack9 wrote: post #101

> That’s true only in a very narrow sense. I love his complete willingness to mislead. What an asshole. If a bank can borrow from the Fed at a lower rate, they refinance their existing debt almost immediately. This trickles down to smaller institutions without the ability to borrow directly from the Fed. It's not true that the Fed sets the interest rate in a narrow sense, it's true in a very strict and immediate sens…

Why did you take one sentence out of context and pretend to refute the entire article?

Re: Why are interest rates so low?

#116

Post by jdmichal »

collyw wrote: post #90
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.

I have discussed this with friends recently. Why do we need growth? I don't need a faster iPhone, or more tech. I honestly don't see my life being any better for the last ten years worth of "growth" (much of which seems to have been pumping up asset prices). I would quite like to relax and coast a bit in life, but with the constant chasing of growth by everyone else, standing still means you will get left behind (i.e…

So you'd be happy without the last 10 years, with your iPhone that was initially released 8 years ago -- and which promptly increased the cell phone market from race-to-the-bottom "dumb phones" to high-margin "smart phones"?

Re: Why are interest rates so low?

#117

Post by branchless »

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…

"House prices at an all time high"

So young people are poorer - this is not good. The wealth effect will wear off for older people who have housing and then the young are left passing over more of their labour to older people and banks.

Re: Why are interest rates so low?

#118

Post by cmdkeen »

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…

Because not everyone has a Swedish lifestyle, and you seem to be stretching the upper bounds of immigration. So how do you propose dealing with the 1 billion+ people in the world who need their stands of living increased?

Capitalism has worked wonders at relieving poverty across the globe. It may have led to wage stagnation in outsource-able jobs in the West but it has led to a huge global poverty reduction. Even in Europe it has led to mass improvements in jobs that can't be outsourced, including plenty of blue collar jobs.

Maslow's hierarchy of needs is 72 years old now, it isn't rocket science, people can only be happy in their circumstances if their more basic needs are met.

Re: Why are interest rates so low?

#119

Post by cmdkeen »

beamatronic wrote: post #104
collyw wrote: post #90

Earlier quoted context omitted.

I have discussed this with friends recently. Why do we need growth? I don't need a faster iPhone, or more tech. I honestly don't see my life being any better for the last ten years worth of "growth" (much of which seems to have been pumping up asset prices). I would quite like to relax and coast a bit in life, but with the constant chasing of growth by everyone else, standing still means you will get left behind (i.e…

I'll take "peace" over "growth" at this point.

The world as a whole is in one of its most peaceful periods ever. The 1990s saw a genocide in Europe, horrific civil wars in Africa, before that you had the Cold War with all of its attendant problems.

Growth and Peace aren't mutually incompatible aims.

Re: Why are interest rates so low?

#120

Post by jdmichal »

enraged_camel wrote: post #107
collyw wrote: post #90

Earlier quoted context omitted.

I have discussed this with friends recently. Why do we need growth? I don't need a faster iPhone, or more tech. I honestly don't see my life being any better for the last ten years worth of "growth" (much of which seems to have been pumping up asset prices). I would quite like to relax and coast a bit in life, but with the constant chasing of growth by everyone else, standing still means you will get left behind (i.e…

I think you're simply demonstrating that it's incredibly easy to take technology for granted and not realize how much it has improved our lives just within the last ten years. Very simple example: back in 2005, most people had to print or memorize directions when they were traveling somewhere they didn't know. A few tech enthusiasts had discrete GPS gadgets, but navigation was a manual and tedious (not to mention dan…

Also, those "incremental" improvements often lead the way for more advanced applications of the device. To carry your example, at some point GPS is not feasible because, off the top of my head:

* Screens are not good enough.

* Processors are not fast enough.

* Radios are not sensitive enough.

* Data storage isn't small enough.

* Batteries aren't dense enough.

It took these things all converging with "incremental" improvements to allow the major advancement of consumer GPS.

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