10 points by djyaz1200 5 months ago | parent [-] | on: U.S. personal income posts first drop in over thre...
"We can't sit there and leave interests rates low forever" ...says who? What force dictates that the equilibrium for rates must be higher? Yes that's historically been the case but that doesn't mean that's the right path for us now and in the future. I would argue that low interest rates will be and need to be the new normal.
Interest is the ultimate rent seeking activity. The fed funds rate is a form of price fixing for banks whereby they collectively decide how much interest they can extract from the economy without killing it. Why must this be the case, the economy should be allowed to run much hotter for much longer.
Inflation is less of a risk now because of technology + globalization, right now we are experiencing significant deflationary pressure as products and labor converge towards global pricing/wages.
Our economy and government will be in very serious trouble if we have to pay higher interest on our significant national debt, so the government has a big interest (pun intended) in keeping rates low to protect its own financial solvency.
Finally, high interest rates imply money is scarce and that's far from the case now. Having large sums of money is not what it used to be, you're competing against a lot of other people and organizations seeking to deploy that money productively for a return. This generates downward pressure on market interest rates as evidenced by European Central banks going below zero to negative rates.