Are Low Interest Rates Good?

Tyler Durden's picture

In a perfectly succinct follow-up to Last Friday's Santelli-Kaminsky CNBC-aberration discussion of the now status quo financial repression (low interest rate / QE environment), this two-and-a-half minute clip asks and answers the seemingly simple question of whether low interest rates are good. Borrowing and saving are really about whether to consume more now or later (or more later and less now) and we agree with Professor Antony Davies that these decisions are best left to individuals - and not the nanny-state/Fed. Each person's judgment of what is best for them is replaced by the Federal reserve's judgment and the free market interest has become a thing of the past (for now). Lower rates don't mean more spending; they mean more spending now and less in the future.

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Dear Infinity's picture

Good for them -- not us.

BankRiot's picture


Have you heard any rumors of JP Morgan cancelling employee vacations this summer in order to prepare for a financial collapse this summer?



X.inf.capt's picture

OH hell

this just gets better and better...


I think I need to buy a gun's picture

someone on twitter said pimco did

Max Fischer's picture



No.  It was encouraged that employees not travel to Europe for vacation, due to possible violence and uncertainty with the valuation of the Euro. Employees are still able to block out vacation time, and travel wherever they please. Additionally, some meetings scheduled in Europe are being re-scheduled for NYC. 


neidermeyer's picture

I'd be happier to hear that all executive level banksters had their passports suspended in anticipation of charges ... or that the O had decided to balance the budget by having the IRS go after past due amounts and penalties on failed REMIC's....

JackT's picture

Nice find. Anyone else hearing this?

lolmao500's picture

I wouldn't mind 0% interest rates if the goddamn FED gave 0% interest money to EVERYONE not just their buddies at the big banks...

AlaricBalth's picture

No, however I did hear at a derivative conference that the financial collapse was cancelled this summer in order for the JPM employees to enjoy their summer vacations in the Hamptons.

Don't you know that the TBTF banks control world financial events, not vice versa.

Harlequin001's picture

Haven't they deferred the collapse until Wednesday?

Trimmed Hedge's picture

"Have you heard any rumors of JP Morgan cancelling employee vacations this summer in order to prepare for a financial collapse this summer?"


Ah, yes.. the well-timed "leak"... Like clockwork.

A little more downward pressure as the big boyz finish gobbling up 'em shares -- u know, right before QE3 is announced....

cdude's picture

Good for whom? Perspective makes all the difference.

bugs_'s picture

Is free gas good?

Long-John-Silver's picture

Only is you ate free beans.

tu-ne-cede-malis's picture

If the quality of these LearnLiberty videos (and many, many others) isn't an indicator of Higher Education's future irrelevance, then I don't know what is.

you enjoy myself's picture

"they mean more spending now and less in the future"

well, yeah, but that's a feature and not a bug when you're a politcal actor that only thinks in 1-4 year horizons.  IBGYBG.  Ben just wants to make it to 2014, Obama and Congress only gives a crap about making it to this November.

buttmilk's picture

Can i get more now and later.

Cursive's picture


It works until we hit a brick wall or fall off a cliff.  1950 to 2000 was pretty incredible, especially if you medicated yourself through the 1970's.

Sabibaby's picture

I don't understand why we can't spend more now and spend more later?


WTF this guy is obviously a jerk!

Matt's picture

That would require more jobs, more pay for working (and not just nominally, but on a more absolute scale) AND higher savings. That's preposterous.

Sabibaby's picture

I guess that's the point of this thread then... why save when you have more insentive to spend?


This will end badly :(

surf0766's picture

The only way they were able to keep pushing rates down was to manipulate inflation lower so the sheep would not think they were being hurt buy higher prices.

When the final print happens the sheep will still not understand.

Alpacanio's picture

Asian markets are tanking ATM...

A Lunatic's picture

There won't be a fucking later..............

Sabibaby's picture

It unanimous then, SPEND NOW!!!

Cursive's picture


This actually does explain much of the consumer spending over the last 3 years.  The other driver has been the cost of inflation pushing those expenditures ever higher.  Inflation really works great for TPTB.

Sabibaby's picture

That makes a lot of sense. Does the consumer have reason to be concerned or are they preparing for something? I;m guessing movies and big screen tv's but I suspect a few might have something else in mind...

JustObserving's picture

US debt is too high to afford normal interest rates - so they have to be very low. We are running $1.5 trillion a year deficits now  If interest rates were like those in the 90s, we would be running $1.9 trillion deficits a year.

The Fed has no choice but to keep interest rates low so the US can service its debts.


midgetrannyporn's picture

no fed, no debt. problem solved.

vast-dom's picture

i'm giving u a +1 just for that name son!

mickeyman's picture

But if the Fed thinks that low interest rates will boost employment, they have another think coming. Why borrow money to build factories when at zero percent you can afford to keep borrowing and gambling on a leveraged Martingale strategy until you win.

Matt's picture

So the solution is for banks to charge a higher margin ontop of prime. This will help banks make more profit, encourage people to reduce debt, while keeping interest low for the Federal Government, which cannot possibly be expected to spend responsibly.

surf0766's picture

How about we switch to GAAP and not cash accounting and state the real deficit of $5 trillion per year. Who manipulated inflation rates to allow the push down  in interest rates. How many decades did they know this was coming?

Stock Tips Investment's picture

One of the functions of prices (and the interest rate is a price) is to convey information. When the price of a product rises, investors and consumers are receiving information. There is much demand for this product or there is insufficient supply or there is a run or any other reason. But investors and consumers "receive" information and make our own decisions. When you "manipulate" the interest rate, you are looking for investors and consumers to behave in certain ways. But this is a price "artificial" in the long run, the market takes care that the price reflects what is really happening between supply and demand. When this finally happens, the consequences can be disastrous.

q99x2's picture

Abolish the FED.

X.inf.capt's picture

when interest rates go up

and they will go up....

you wont have to abolish the will collapse all by its self....then we may see a gold standard...if were lucky enough to live through the collapse...and austerity...and riots...and another world war...and the zombies...


Eireann go Brach's picture

Everyone on here should wipe their arse with a $20 bill and then mail to the Fed and Bernankes attention with a note that says "you are full of shit".

A Lunatic's picture

Can we use a Ten instead? I rather like Andrew Jackson.

urbanelf's picture

Stay away from me Lucky Charms!

FreeMktFisherMN's picture

At least I was heartened to get a dollar bill in change last week that had 'End the Fed' coming out of GW's mouth. 


As far as interest rates, I cannot even fathom when people say they used to be in the teens. Then again I'm only 21 and for most of my life in which I've been aware rates have been egregiously low. 

azzhatter's picture

I had an 11 3/4% mortgage on my house in 1979 with 20% down payment

FreeMktFisherMN's picture

imagine that; legitimate lending standards.



Let them eat iPads's picture

Not nearly as funny as cartoon bears, but succinct, to the point and easy enough for the average Ameretard to grasp.

Thunder_Downunder's picture

But but... what if everyone tries to save at once.. won't we be ... doomed? If capital is withdrawn in a capital constrained environment, wont the cost of capital rise? Rewarding the selfish penny pinching savers, and encourage more hoarding? Wont that unfairly punish the speculators by destroying the marginal returns they're barely achieiving... AKA big banks...?


Our keynesian friends tell us that only the wealthy can safely accumulate...  if the foolish masses start saving too the world falls apart, hence they must be forced to spend and take risks... so that the wealthy can consolidate their wealth and save us from the booogie man of recession. And to save us from all the foolish investments we made whilst being forced to spend....


I for one, salute the central banks of the world. Saving us from certain doom, and gifting us with a less certain but no less inevitable one :D

azzhatter's picture

It's killing me, I am consuming my seed corn

Bunga Bunga's picture

Lower interest rates mean thicker mattresses bitchez!

FieldingMellish's picture

We have become: consume more now and more later.