President Trump: The NEW one and only politics thread

Interest rates are prices. They are the most important price in a market economy because they discount future cash flows and help to set investment hurdles and force people to measure financial risk. Take it out of the realm of a free market economy, and you get very serious distortions, to say the least. Over the last half century or so, as central banks around the world have interfered with that price to a greater and greater degree (it requires more radical interventions with each crisis they create), it has created serious misallocations of capital, leading to a series of sugar highs, such as the dot-com bubble, the housing crisis, etc. It comes at a cost. First, there is the opportunity cost of where we might be today if capital had found more productive uses, and where we would be instead in terms of increased standards of living. Who knows what we've sacrificed? It has also led to some terrible busts that are the price for those sugar highs, which required nasty deleveraging periods (paying the price for flooding the economy with way-too-cheap credit, leverage and liquidity and creating debt messes), except rather than paying that price, they have stepped in each time to price fix the cost of money with even more drastic measures, rather than acting responsibly. In effect, trying to answer their self-created debt crises. . ... with more debt to hold off payback. And we are drowning in debt at the consumer, corporate and sovereign levels worldwide right now because of it. Eventually, there will be no avoiding the price.

Of course, higher prices "hurt" consumers. I mean, we all wish that iPhones cost less. And that cars were cheaper. And that eating out wasn't as expensive as it is. And that homes didn't cost anything. .... and that there was no cost to borrowing. But setting those prices by government fiat in the form of price controls (which is what central banks do), isn't an adult answer to what is an intractable problem of scare resources in the world. Price controls lead to shortages, wasted resources and disincentives to invest in what consumers actually want. Think the Soviet Union's economy at the extreme.

I know your post got the jokes about me. I'll save you the rest of a post. If you want a good discussion about this, though, and what is likely on the horizon in the wake of what central banks have done, here is a podcast from a few months ago that might interest you (or someone else on here), if you want to make about a 25 time investment.