| but I don't think it's related to interest rates. It absolutely does have to do with interest rates. Rates are kept artificially low by central banks due to all the debt that has been accumulated the last decades. We're at the end of a long-term debt cycle. It's quite easy to see how artificially low interest rates are increasing social inequality. Just look at house prices, the older generation who predominantly own houses have had their wealth inflated by increasing house prices and that has happened due to low rates. Younger generations are often priced out of buying homes. What if you assume that this state of affairs is strange because new, but perfectly benign, and will last indefinitely? You mean this time it's different? The current setup is not sustainable. Debt is growing faster than income/GDP all over the world (since before Covid). In a long term regime of zero rates, more of society's wealth is going to producers (and risk-takers), less is going to people who just hoard cash. Savings is not "hoarded cash". Saved money is usually put to productive use by banks loaning it out again to other people. Money spent on real-estate on the other hand, is not put to productive use and does not meaningfully grow the economy. |
What do you think the natural rate of interest should be? Why?