J is just about as Lefty McLeftish as anyone, but she gets furious that she's earning so little interest on her savings, too.
There's too much demand for safety, which drives down interest rates. (Negative yields in Europe mean that people are willing to pay for the privilege of locking up their money for 10 years rather than being paid interest.) That means there is far too little demand in the economy for the money. People with money need to spend more, the governments needs to spend more, to drive up interest rates and put the excessive savings to work. Just trying to fix the interest on savings without fixing the underlying lack of demand won't work. (We would just end up with high interest rates in a still excessively-depressed economy.)
So another few years of low Fed Funds rates is worth it if it helps get the economy on a stronger footing for better balance of demand and supply. Driving up interest rates prematurely and damaging longer-term growth is a poor bargain.
It would be different if rates were high in the European and Asian developed economies. They've been falling in China, also too. They're telling Janet to go slow, and she seems to be listening.
Cheers,
Scott.
There's too much demand for safety, which drives down interest rates. (Negative yields in Europe mean that people are willing to pay for the privilege of locking up their money for 10 years rather than being paid interest.) That means there is far too little demand in the economy for the money. People with money need to spend more, the governments needs to spend more, to drive up interest rates and put the excessive savings to work. Just trying to fix the interest on savings without fixing the underlying lack of demand won't work. (We would just end up with high interest rates in a still excessively-depressed economy.)
So another few years of low Fed Funds rates is worth it if it helps get the economy on a stronger footing for better balance of demand and supply. Driving up interest rates prematurely and damaging longer-term growth is a poor bargain.
It would be different if rates were high in the European and Asian developed economies. They've been falling in China, also too. They're telling Janet to go slow, and she seems to be listening.
Cheers,
Scott.