We've been trying that for a good chunk of the last decade. That's why interest rates have gone to near zero, and in some places negative. It's not working so well.
Near zero interest is completely unsustainable and clear evidence of problems in the market. They have lead to unimaginable asset bubbles that we still haven't seen pop.
There's been some research [0] that the last decade has seen the lowest interest rates in 5,000 years.
We have been continually increasing solving market problems by just creating more credit but eventually you have to pay your debts.
We're headed for trouble potentially bigger than anything we've seen before if we continue on this path.
So weird to think that near-zero interest rates are the best you can do for the next 10 years. I'm pretty sure everyone way saying "lock in this low interest rate before they go up again!"
It might help to think of it as going beyond zero interest rates to the point of intentionally punishing traditional savings to try to force consumer spending (if you hold onto it, we'll devalue it), entice borrowing (we'll essentially pay you to buy a house [1]), etc. There are various approaches to pushing rates below zero. Japan and the ECB have done a lot of experimenting, the US will probably take some notes from them when it comes time to push US rates below zero persistently.
In fact, the problem has been that rates aren't low enough, they are united by the zero lower bound. The natural interest rate would be several points in the negative.
Problem is interest rates are still very close to the 0 bounds. Even a few years ago interest rates could simply not go any/much lower. Since we had the same problem when interest rates could not go any lower, I don't think its interest rates themselves thats the problem. Instead the problem is a global excess of savings vs. demand resulting in a situation where interest rates decrease and there's more money then there are things to invest in.
Indeed. Those "near-zero" interest rates you mentioned? They don't last. We could only lock in a 5-year rate -- the rates that come after that loom large in our awareness.
> Interest rates had been rock bottom since the 2008 crisis
Exactly. So we had ~14ish years of effectively 0% interest rates. That's never happened before in history. Now that we're going back to normal rates, we're discovering that some things we did when rates were 0 aren't actually feasible anymore.
That's what ZIRP is. It's a decade and a half of 0% coming to an end.
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