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by cat199
2509 days ago
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> Due to an overabundant supply of investors with a high demand to seek profitable low or no risk investment opportunities to park their wealth for growth via interest, and a much lower supply of profitable low or no risk investment opportunities—the interest rates to park your wealth must fall. Or, lowering interest rates creates overabundant demand for low/no risk investment opportunities... while I agree with your analysis, it's only valid for 1 side of the coin - similarly,
this all also 'nicely corresponds' with the rise of supply-side / trickle-down economics as well.. as for inflation: is not a growth in wage disparity just as good of a measure of relative inflation over time as some small and continually modified basket of consumer goods? |
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Lower relative interest rates creating the overabundant demand doesn’t seem to carry as much explanatory power when you consider that interest rates were also relatively lower before the hyper-inflationary period. What changed is not just the interest rates being lower. True lower rates have some effect, it’s just not enough when you consider that the investments will also be lower growth.
Supply side economics has a hand to play here, already mentioned in deregulation, lobbying by corporate interests, decreasing tax-rates on corporations and the wealthy, financial sophistication and technology of said parties to avoid taxation and capture more of the economic progress. I guess the issue is with supply side... that it is very much USA centrist and is not entirely explanatory globally. The USA does have the world’s reserve currency though. But take Japan for instance, it started the trend of low interest rates and QE forever because of globalization issues with currencies and economies, not supply side economics.
I think supply side movement isn’t really incompatible with my explanation and it actually fits inside it instead of my explanation fitting inside supply side changes. I think it is helpful to remember that the neoliberal economic and libertarian agendas are responsible for all of this in any event.
Income inequality is another issue... economic progress for the laborers being incremental at best while the progress of capital owners has been explosive. There is a tie-in possibly, that the income share of labor is being hallowed (or crowded) out by capital. That the economy is making laborer and consumer activity highly irrelevant in the grand scheme of things. The economy is more concerned now about retaining capital that be can pulled out en mass on a whim and major investments can be postponed on an indefinite basis for years until the conditions are capital-perfect again.
The relevance of consumption is diminishing and laborers and consumers are increasingly living in an economy that is not concerned with balancing the affordability of housing and education and health care with how the rest of the economy is performing... especially the items that are rather inelastic and you require to live or progress.