High Interest Rates – Bad, Low Interest Rates – Not Necessarily Good
When the history of The Great Recession, The Technical Recovery, and now what This Dismal Political Economist is calling “The Great Stall” is written, much focus will be on the failure of the economics profession to properly diagnose the cause and to properly prescribe the treatment.
|When Monetary Policy is Mostly Ineffective|
What many economists do not understand is that the ability of monetary policy to affect an economy that is expanding too fast is far greater than its ability to impact an economy that is growing too slowly. If the economy is growing at too high a rate, a reduction in credit availability and higher interest rates will slow it down, even stop growth altogether. Without credit sources, business and consumer spending must slow.
|The Shell Game - Monetary Policy|
The credit debacle still hangs over the market.
Lenders, meanwhile, are still dealing with the effects of the boom-gone-bust and are forcing prospective borrowers to go to extraordinary lengths to prove their creditworthiness.
So yes, rates are low, if you can get a loan.
|Picture of an Oxymoron|
But the lender would not accept that money unless the Smiths provided a certified letter from each of 14 guests, stating that the money was a gift, rather than a loan