
Why Very Low Interest Rates May Stick Around - tysone
http://www.nytimes.com/2015/12/15/upshot/why-very-low-interest-rates-may-stick-around.html
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um_ya
The fed is in a box. If they raise interest rates, they will have to service
their $18 trillion national debt and expose a lot of malinvestment in the
private sector. If they don't raise interest rates, their only tool to fight
the next recession will be to print money, which could cause the currency to
collapse. Choose your poison.

~~~
r00fus
The debt could easily be serviced by raising taxes on those who could afford
it (i.e., high income) and to de-emphasize the kind of things that don't
service the markets (i.e., HFT & front-running) by introducing a small
financial transaction tax.

The country doesn't have a debt problem - it has a revenue problem.

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toomuchtodo
We're so adverse to raising taxes in the US, we're raiding the Federal Reserve
to pay for road repairs instead of raising the insanely low gas tax (which
hasn't been raised in almost two decades).

[http://www.ft.com/cms/s/0/a8aee1d4-991c-11e5-95c7-d47aa298f7...](http://www.ft.com/cms/s/0/a8aee1d4-991c-11e5-95c7-d47aa298f769.html)

EDIT:

Anyways, back on topic:

* Shifting demographics

* Oil/energy glut

* Slowing China economy

There's too much supply and not enough demand in the world (speaking macro
economically). You can't "push the string" and force demand, even with zero
interest rate policies (you'll just get an asset bubble; witness housing and
equity prices). The developed world's future is Japan, and frankly, that's not
such a bad thing.

This doesn't mean those giant pools of money aren't hungry for returns though.
Notice how quickly those funds in developing countries floods back to the US
at the slightest hint interest rates are headed back up.

If you haven't read up on the high yield/junk bond slow motion train wreck
occurring, you should.

[http://www.bloomberg.com/news/articles/2015-12-14/investors-...](http://www.bloomberg.com/news/articles/2015-12-14/investors-
see-more-carnage-as-third-avenue-spurs-contagion-risk)

> Debt of struggling companies has slumped, with one market gauge falling to a
> six-year low, as declining energy and commodity prices hit producers just as
> the Federal Reserve prepares to raise borrowing costs for the first time in
> almost a decade. Scott Minerd, global chief investment officer at Guggenheim
> Partners, predicts 10 percent to 15 percent of junk bond funds may face high
> withdrawals as more investors worry about getting their money back. He joins
> money managers Jeffrey Gundlach, Carl Icahn, Bill Gross and Wilbur Ross in
> warning of more high-yield trouble ahead.

TL;DR Janet Yellen either a) waited too long to raise short term interest
rates or b) raising them at anytime was going to break the bank.

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paganel
> instead of raising the insanely low gas tax

Never been to the States, but wouldn't that be a regressive tax? And
regressive taxes are morally bad, as in they hurt the poor more than they hurt
the rich. I'm saying this because if you work a McDonald's job in Europe (from
where I'm from) you don't probably have a car, you live in the city, and have
the benefit of having access to relatively cheaper public transport, but if
you have a McDonald's job in the States chances are big that you're going to
work by car.

~~~
aianus
It doesn't have to be a regressive tax. We have sales tax here in Ontario,
Canada which is "regressive" but then in April, if you earn less than $XX per
year, the government gives you a refundable tax credit (read: a check) for the
estimated sales taxes you paid during the year.

The US should do the same thing with gasoline. Let the rich people with
premium-gas-guzzling V8s pay through the nose for the luxury of polluting and
use the money to wean the country off of oil.

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lsc
the graph is a little bit deceptive; Before Nixon, dollars were more-or-less
tied to the value of gold; sometimes more, sometimes less, and yeah, you can
point at the "greenback" and a few other times we left the reservation, but...
more or less, before nixon, the dollar had _something_ to do with gold. After
Nixon, that went out the window.

Now, some of you like the gold standard... me, I don't, but whatever you think
about the gold standard, you can't really compare the interest rate on gold-
backed currency to the interest rate on currency that isn't backed by gold.
They are qualitatively different things.

Go back and look at the graph from, say, 1968 to now, and, well, it shows that
we know a lot less than we think we know, or at least we have a lot less
history to draw lessons from than we think we do.

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Eliana
Heavy burden (and power) given to the Fed knowing that with every rise or
decrease in the interest rate, even the slightest, can economically impacts
every corner of the world.

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cft
The low interest rates will stick around until the dollar stops being the
world's reserve currency in about 25 years, taking the US economy down with
it.

~~~
dualogy
> the dollar stops being the world's reserve currency in about 25 years

Nice timing, since nobody will recall your comment in 25 years.

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aburan28
They Fed needs to get a grip. Interest rates cannot sustain a functioning
economy at near 0 percent rates. This is getting ridiculous already. If they
do not raise the rates on Wednesday they will have lost a lot of legitimacy

