Are Low Interest Rates Good?

Are low interest rates good for the economy? Many argue we need low rates to increase spending, since these rates make borrowing money cheap. Prof. Davies explains, however, that lower rates don’t mean more spending; they mean more spending now rather than in the future. The choice for every individual is to spend more now (borrow), or spend more in the future (save). So what interest rate is best overall? Prof. Davies says the best rate is the market rate—the rate we get when the Federal Reserve doesn’t meddle in financial markets. Individuals know better than the government how and when to spend their money, and should be left alone to make their own decisions. Find LearnLiberty on… Twitter: bit.ly Facebook: on.fb.me Our Website: bit.ly
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24 Responses to “Are Low Interest Rates Good?” Subscribe

  1. noderunner9 December 23, 2012 at 2:27 pm #

    You said it yourself: it can go either way. If the business in question produces a lot of value, then it was a good deal. But only if it produces value and pays pack the loans. The point is that when an investor uses his own money to fund a business, he is more likely to make better decisions than the federal reserve creating a single interest rate for everyone in the market to follow. Plans by the many are better than plans by the few.

  2. iMariuz December 23, 2012 at 2:57 pm #

    Yup, short and simple

  3. Nolan Ladouceur December 23, 2012 at 3:43 pm #

    I understand what he is saying about consumer spending, that makes sense. What about interest rates and business loans though?

    Don’t low interest rates promote business start ups and expansions? These down the road produce more wealth then principal and the interest more times then not. So can’t low interest rates to debtors with good credit be a positive thing?

  4. Victor Enriquez December 23, 2012 at 4:17 pm #

    well with American anti-trust laws it would be illegal for banks to collude, they’d be considered a cartel if they agreed on interest rates. without the fed I’m guessing you would have more competition concerning loans and interest rates but we’d also lose our ability to quickly fight inflation and recession which the Fed provides through monetary policy.

  5. Victor Enriquez December 23, 2012 at 4:47 pm #

    but if it’s possible for your bank to fail, you could lose your money and then it would be up to the FDIC to cover you, I think they cover up to $250,000 but then the burden just gets put on tax payers and future generations through larger debt. I mean you can’t really win when it comes to banking.

  6. Mahmudul Huq December 23, 2012 at 5:01 pm #

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  7. Michal Kononenko December 23, 2012 at 6:00 pm #

    No deposit insurance? I’m kinda glad (at least in Canada) that I can sleep at night knowing that my deposits won’t be wiped out tomorrow, and the problem wasn’t necessarily risk in itself, it was too much risk taken on due to low interest rates and consequently insane leverage ratios. When Lehman went bankrupt, it was leveraged 30.7 times its actual net worth. Other banks weren’t much better either. Phony money bought those assets, and so lack of a bailout would have been a disaster.

  8. UnknownXV December 23, 2012 at 6:13 pm #

    Because of bankruptcy, most people do not pay back the loans they accrue. Personally, I think Bankruptcy is ridiculous. That you can void all debts owe by running to the government is beyond pathetic. YOU took the debt. YOU took on the risks and responsibilities that go with it. Be a god damn adult and take care of your own business instead of acting like a child.

  9. UnknownXV December 23, 2012 at 6:25 pm #

    The central bank is the banking cartel. Only it’s backed by the fucking government.

    I trust a private bank more than a semi-federal one. Simply because it’s easy as hell to destroy a company, but nearly impossible to take down a government.

  10. boylston1276 December 23, 2012 at 7:15 pm #

    Interest rates for saving and for borrowing are the same thing. Very few people have 100k stashed away and even if they have that much money available it is invested and not sitting in banks. On the other hand people very often have 100k+ loans. People also often save money and have a large loan at the same time.

  11. HWGuyEG December 23, 2012 at 8:04 pm #

    This, interest rates are fixed globally by all of the major banks collaborating.
    Interest is usury, unsustainable, money is taken out of the market and put into the hands of useless pigs.

    Fun thing to do, get a quote for a loan from a bank, give two sets of details, say you’re a wealthy Jew with an average history, then call back say you’re an middle lower class Armenian with a spotless history.
    Most banks have internal rates with race being a factor comparable to income.

  12. Squiremjr December 23, 2012 at 9:04 pm #

    Every Learn Liberty video summed up: “The government needs to pull their dick out of the economy and let the free market sort itself out”

  13. Sango Dragon December 23, 2012 at 9:32 pm #

    First off, before I say anything, I am all for a majority free market (minimal regulation, etc…).
    You bring up the survival of the fittest arguement. So, yes, the weak will die off, and the strong will thrive. However, once an entity has become powerful enough, and there’s no regulation, it can tear down any potential threat before it’s even a real threat.
    Like you said, they aren’t going to invest in that risky, new bank, they’d go to their tried and true big bank. Arguement to be continued..

  14. chivenyc December 23, 2012 at 10:25 pm #

    Fed or no fed, the banks would be fixing the interest rates, so consumers will have no choices.

  15. AquaSteel December 23, 2012 at 10:38 pm #

    Does that chart include the fact that people are un-able to maintain their current lifestyles due to the job/house market collapse, and in return need more debt to sustain themselves. Maybe that’s why they all have more debt? Maybe the chart is misleading because its trying to associate something while ignoring all the other factors? Heh, not like learnliberty has ever been misleading in corporate favor.

  16. MrGman543 December 23, 2012 at 11:04 pm #

    there amazing! i highly recommend Bill Whittle and HowTheWorldWorks.

  17. PonziNation December 24, 2012 at 12:04 am #

    You just replied dumbass, now either reply with a proper argument or shut up and stop spreading misinformation.

  18. anticosmopolitan December 24, 2012 at 12:41 am #

    You would be getting a reply if it weren’t for the immature insulting language, kiddo.

  19. PonziNation December 24, 2012 at 1:00 am #

    Your full of shit, we already have a banking cartel which is facilitated due to having central banks. If the governments didn’t support banks when they get into trouble banks would go bust. Banks wouldn’t engage in risky activity for fear of this and only the best banks that provide the best services would survive. Also if there was no deposit insurance people would be more prudent giving their money to a bank and would only deposit money with banks that they thought were not going to fail.

  20. Johnny Void December 24, 2012 at 1:58 am #

    Um. what? I was told the interest rate goes to the bank and the people never get that money back and that is how the banks make money. How is it that people get their interest rates back when their older???

  21. anticosmopolitan December 24, 2012 at 2:35 am #

    How naïve… If the government (and I know the Fed is not it) — if the government abstains from all control of the economy, a powerful banking cartel will be free to put any noose it like around the nation’s neck. There is no free market and never will be, gentlemen, even if you fully deregulate. LearnLiberty does the bidding of the Misters Rothschild and Rockefeller, and may well be financed by them directly or indirectly.

  22. xcvsdxvsx December 24, 2012 at 2:49 am #

    and i have a goose that lays golden eggs. If you arnt going to substantiate your claim what good can it do any of us? Or was it your intention to pontificate?

  23. OddRobb December 24, 2012 at 3:09 am #

    And the only problem with your comment is that it’s stupid

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