[quote=harvey][quote=CA renter]You’re mixing up cause and effect. In the current low-rate environment, we are experiencing these low rates NOT because of what investors would demand, but as a result of the Federal Reserve’s manipulations. Did you not notice what was happening to interest rates as the credit bubble started deflating and price deflation set in??? Interest rates were shooting UP, not down. Rates can go up during deflationary times (real rates are almost always positive), especially if that deflation is the result of a bursting credit bubble. Money is more dear during deflationary times, so the price of money goes UP relative to what’s going on in the rest of the economy. Interest rates are highly positive during most deflationary events.
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Yes, clearly I’m the one who is mixed up. You’ve explained everything perfectly. The wisdom in that paragraph is irrefutable. Let’s call out a few gems, as they will likely be referenced by economists for centuries:
[quote] Rates can go up during deflationary times (real rates are almost always positive), especially if that deflation is the result of a bursting credit bubble.[/quote]
Absolutely true. No need to provide any historical examples as there are many. Your knowledge is deep.
[quote]Money is more dear during deflationary times, so the price of money goes UP relative to what’s going on in the rest of the economy. [/quote]
Brilliance. Pure brilliance!
[quote]Interest rates are highly positive during most deflationary events.[/quote]
Indisputable. Dismiss the naysayers outright. You are the only person on this forum – nay, on the entire internet – that truly understands macroeconomic phenomenon.
Your intellect is truly superior to all.[/quote]
Regarding the bolded portion of your quote, it appears that you’ve missed the sentence just before the one you’ve quoted. I’ve bolded it for your benefit, since you have always had issues with reading comprehension.
You can also look to Greece, Spain, Portugal, etc. when deflation started setting in there. What was happening to their bond markets/interest rates? And remember that those were nominal interest rates. Real rates were even higher.
You are only looking at the central banks’ *responses* to deflation. They are the ones who try to force interest rates down in order to force money into the economy (with varying results). They are trying to offset the (naturally) rising interest rates.
Low interest rates are not an indicator of what the “free market” demands for their money if central banks are pushing rates down. Deflation does not cause low interest rates; central banks do.
As always, you resort to personal attacks rather than bringing any facts or data to the discussion that would refute what I’m saying.
Can you bring any actual data, statistics, facts, or logical arguments to refute what I’m saying?
