[quote=FlyerInHi]CAr, when interest rates are high, money is in short supply. So speculators as you call them, just hold money. They don’t need to buy and sell things to make more money. That’s a great environment for people at the top with loads of cash.
Since you’re a long term deflationist, you shouldn’t lament low interest rates. Just hold cash and it will be worth more with deflation. There’s your nest egg.[/quote]
Once again, even if speculators hold their money (and savers are not speculators in the sense that I mean it), that money is still being invested or spent into the economy unless the savers are keeping their money under the mattress. Banks use the deposits as reserves for their lending.
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[edited to add]…
Also, higher interest rates don’t necessarily mean that money is in short supply, it could also mean that investors think risk is too high.
When money is dear, better decisions are made, destructive bubbles are far less likely to inflate, and speculation is reduced. IMO, the ratio of speculation to genuine productive investment is reduced. And people don’t bury themselves with debt for consumption. That is good for the economy over the long run.
