Interest Rates Question

[DCal430]

No, you simply picked one method and claims its accepted by all major economists. Thats just plain BS.

The idea that the lower interest rates led to the lower wages in the long run for japan isn't accepted by any major mainstream economist.

 

[DucatiMonster696]

You dont seem to understand that lower interest didn't cause lower wages, but prevented wages from falling even more. Lowering interest rate causes wages to rise due to rise in inflation.

You don't seem to want to understand that inflation kills purchasing power and incentives for saving. Of which is necessary in nations like Japan because much of their debt has so far been balanced off the backs of savers via their bond markets. Furthermore the issue is complicated when you take into account the negative population growth rates in Japan:

http://www.zerohedge.com/contribute...old-sales-adult-diapers-exceed-those-babies-1

and the effect of this aging population is that savings as a result have sharply declined. Moreover Japan is not making up the difference in population through sound immigration polices because they are one of the most monolithic, homogeneous and xenophobic societies in the world presently and their immigration policies in general reflect these aspects of their culture.

Thus their ability to prop up their debt has diminished on top of the negative effects inflation will have on a obvious aging population and their ability to fuel their bond market via consumer spending and savings in order to sustain their colossal debt load which is at ¥1 quadrillion yen. Yes that is fifteenth zeros with the number one at the end.

 

[ShintaiDK]

The idea that the lower interest rates led to the lower wages in the long run for japan isn't accepted by any major mainstream economist.

Arh please, shall we get back to reality? Japan is a live world example.

If not, then I would like to hear the explanation on why you dont wish to see on Japan as an example.

 

[nextJin]

I think the more important factor that should be asked is what effect does FED mandated low interest rates have on the markets. We have a few things going on here;

- Year over year artificially low interest rates in order to fight against unemployment.
- It's not working
- What happens when interest rates go up? (Yes they have too)

- FED printing money in the tune of 40 Billion a month to stimulate the economy
- It's not working
- What happens when they stop?

When the FED keeps interest rates this low it negatively effects investments and creates bubbles. Prime example is to simple look at the housing boom which of course Bernake suggested Greenspan do.

 

[DCal430]

Arh please, shall we get back to reality? Japan is a live world example.

If not, then I would like to hear the explanation on why you dont wish to see on Japan as an example.

Japan is NOT an example deflation and thus lower wages PRECEDED interest rate drop. But you seem to ignore this FACT.

Again you lack a very basic understanding of economics.

We do have real world examples of when interest rates are not allowed to fall, that is the GREAT DEPRESSION.

 

[ShintaiDK]

Japan is NOT an example deflation and thus lower wages PRECEDED interest rate drop. But you seem to ignore this FACT.

Again you lack a very basic understanding of economics.

We do have real world examples of when interest rates are not allowed to fall, that is the GREAT DEPRESSION.

http://www.economist.com/node/15176489

Japan is the exact example of deflation, lower wages and low interest rates.

Its you who ignores the facts. You have proven absolutely NOTHING in any of your posts.

 

[DCal430]

http://www.economist.com/node/15176489

Japan is the exact example of deflation, lower wages and low interest rates.

Its you who ignores the facts. You have proven absolutely NOTHING in any of your posts.

You are the one who proved NOTHING. The deflation and low wages occurred before low interest, and the lower interest helped slow the deflation down. But you insist on ignoring this fact. You have proven you know jack shit. Learn some f-ing economics and get an education.

 

[ShintaiDK]

You are the one who proved NOTHING. The deflation and low wages occurred before low interest, and the lower interest helped slow the deflation down. But you insist on ignoring this fact. You have proven you know jack shit. Learn some f-ing economics and get an education.

The irony continues with you. Who have proved nothing sofar? (Besides the inability to communicate in a civilized manner.)

 

[glenn1]

You are the one who proved NOTHING. The deflation and low wages occurred before low interest, and the lower interest helped slow the deflation down. But you insist on ignoring this fact. You have proven you know jack shit. Learn some f-ing economics and get an education.

I'm not sure why I'm even bothering, since you seem immune to facts, logic, or even common sense. I realize that you're unable to get past the simplistic prole mindset of only caring about one side of the balance sheet, thinking you can inflate away (or default outright on) past debts, but in the end it doesn't work.

As you can see below, low interest rate policy directly corresponds to higher, not lower disinflation or even outright deflation. In addition, the stoppage and reversal of decades of wage growth basically exactly corresponded with the introduction of the Zero Interest Rate Policy. Zero interest rate policy has led the nations who adopted it (Japan, U.S., UK) to badly lag those which did not (Germany, Canada, Australia). It not only is not effective, it's 100% catastrophically wrong since the major economic players already have too high of a debt load which was used to purchase overpriced assets in the past (e.g. real estate). Not only is there no demand for further credit no matter how low you price it, there remains a huge amount of deleveraging that needs to occur. That you're suggesting we adopt (or maintain) a low or zero interest rate policy in this environment simply shows you're completely deluding yourself. If anything, we need to significantly raise rates and force the final capitulation selling of those holding assets no longer economically viable. Continuing with low rates is only recreating the 'zombie bank' phenomenom, unless your preference is for another "lost decade" like Japan experienced.