The Obama administration deserves credit for quickly ending the housing free fall. In particular, Obama empowered the Federal Housing Administration to ensure that households could find mortgages at low interest rates even during the worst phase of the financial panic.
However, in spite of the general perception that monetary policy should be conducted so as to avert deflation, a central bank cannot lower interest rates below the zero lower bound.
I would also certainly continue to keep loan repayment interest rates as low as possible. And I would spread the financial aid a little less thinly across all income brackets.
I think we do need to try to not just rely on the central bank to, in its wisdom, adjust interest rates, but allow for people to avoid being exposed to inflation risk.
When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward.
Low interest rates benefit individuals or investors who own or want to buy assets; in that regard, they disproportionately benefit wealthier Americans.
We do not attract Russian money to Luxembourg with high interest rates.
There is no difference, where aims are concerned, between a terrorist with a gun and bomb in his hand and a terrorist who has dollars, euros, and interest rates.
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.
The problem with interest rates are that you are not modeling a single number, you are modeling a whole term structure, so it is a sort of different type of problem.
If inflation-adjusted interest rates decline in a given country, its currency is likely to decline.
If you put tariffs in place, it creates inflation. If you put inflation in place, you have to raise interest rates. You raise interest rates, and stock markets shouldn’t be so high.
For highly indebted governments, low interest rates are critical to keep debt levels sustainable and ease pressure to restructure debt and recapitalize banks. The shift to a high sovereign-debt-yield equilibrium would make it impossible to achieve fiscal balance.
In 1936, money had no important role. Interest rates were one-eighth of one-eighth of one per cent. I did some research, and I found that the interest on one million dollars of ninety-day Treasuries was $37. People didn’t even bother to collect it. The Fed wasn’t important.
A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.
With interest rates artificially low, consumers reduce savings in favor of consumption, and entrepreneurs increase their rates of investment spending.
The difficulty for Mr. Obama will be when the public sees where his decisions lead – higher inflation, higher interest rates, higher taxes, sluggish growth, and a jobless recovery.
Despite the deep reforms we are making, traders and speculators have forced interest rates on Greek bonds to record highs.
On average, an underserved consumer spends 10% of their disposable income on unnecessary fees and interest rates.
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