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this post was submitted on 14 Aug 2024
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Economics
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The economy is important. Rates will go lower to protect that.
Central banks I think need to consider a higher neutral rate. Interest rates were too low for too long to try and move GDP growth. In retrospect not a great policy, as it led to a decade or so of inflation in stocks markets and housing.
Why do anything of value if I can just leverage at low rates and dump borrowed money into stocks and real estate?
Central banks tend to be arms reach from government, but maybe they should be doing less and the government more.
GDP growth low? Invest in infrastructure and research. High inflation? Increase taxes.
The economy is doing ok though, inflation is still up. Wallstreet wants lower rates, but listening to them got us extended 0% that ultimately was bad for the economy.
Interest rates going up and forcing over leveraged companies into bankruptcy is also good for the economy.
Maybe tough to get a concensus on where the economy is going to be, a bit of reading tea leaves.
Regardless, agreed on extended 0% being problematic. Out of all the factors dragging us down:
interest rate history, pandemic, demographic shifts, climate change, global instability...
It could be interest rates that are having the largest impact today. Considering it caused such a large wealth transfer, equity inflation, and a drag on productivity.
The whole point of the government not doing anything is that only the central bank can solve inflation through rate hikes.
This ensures further wealth concentration, if the government wasn't lame, more equitable and sane outcomes would be possible.