Global Inverted Yield Curve Sparks Fears of Worldwide Economic Collapse

[XavierJesusLovesIndia]

Here is what the Bible says about interest:

Deut 23:19: "You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest."

Why would God say such a thing? Because, ideally, interest should be 0, or at least close to it. That's what economists are discovering now.

There's a simple way to test the idea that low interest rates will lead to high inflation: It doesn't, and post-crisis US monetary policy shows it.

During 2009-2016, the interest rate was kept at 0. Did inflation skyrocket? Hardly. If anything, the reverse happened.

see the data here: https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi
And https://tradingeconomics.com/united-states/interest-rate

In 2009, inflation even became negative. In 2016, after 7 years of 0 interest rates, it remained at a mere 1.26%.

Data in the link. God Bless.

 

[Cameron143]

Nothing. However, if you go to zero rates now you would have very high inflation and no one would buy US debt.

No one is going to buy a 10 year note that pays 3% if the annual inflation rate of the dollar is 10% and we would be well over that if the Fed went to 0% now.

And that in a nutshell is what is so terrible about 0%, the temptation to borrow money is very great and as long as we live in a sinful world filled with covetousness you will see debt skyrocket. The US has to sell bonds to finance the country, so there is your problem.

Right. Interest increased interest rates act as a deterrent against more foolish policy.

 

[Cameron143]

Nothing. However, if you go to zero rates now you would have very high inflation and no one would buy US debt.

No one is going to buy a 10 year note that pays 3% if the annual inflation rate of the dollar is 10% and we would be well over that if the Fed went to 0% now.

And that in a nutshell is what is so terrible about 0%, the temptation to borrow money is very great and as long as we live in a sinful world filled with covetousness you will see debt skyrocket. The US has to sell bonds to finance the country, so there is your problem.

Another good point you made earlier that was largely unnoticed was lower tax revenues.
This could easily be remedied by 2 means:
1. Lower taxes...lowering taxes always bring increased revenue with higher employment rates and economic activity
2. Stop paying people not to work. We still haven't reached preCovid employment levels and we aren't even close.

 

[ZNP]

Surprise, surprise

 

[ZNP]

Here is what the Bible says about interest:

Deut 23:19: "You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest."

Why would God say such a thing? Because, ideally, interest should be 0, or at least close to it. That's what economists are discovering now.

There's a simple way to test the idea that low interest rates will lead to high inflation: It doesn't, and post-crisis US monetary policy shows it.

During 2009-2016, the interest rate was kept at 0. Did inflation skyrocket? Hardly. If anything, the reverse happened.

see the data here: https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi
And https://tradingeconomics.com/united-states/interest-rate

In 2009, inflation even became negative. In 2016, after 7 years of 0 interest rates, it remained at a mere 1.26%.

Data in the link. God Bless.

The reason capitalism has been so much more effective than communism is because of the ease with which we can move capital around. No one is going to loan money at 0% interest rate. Why would you buy a bond if it paid 0% interest?

2nd, the verse you quoted would be completely unnecessary if God told them not to charge anyone interest. It simply says you don't charge your brother interest.

 

[XavierJesusLovesIndia]

Well, first, any thoughts on the fed funds interest rate being zero from 2009-2016 and the CPI inflation also being low? That shows low interest rates do not lead to high inflation. At best, their impact on inflation is minimal. Some have even argued low interest rates lead to low inflation.

"A new theory of interest rates, the Neo-Fisherian theory, predicts a low inflation rate due to a central bank’s low interest rate. After several years of near-zero interest rate policies and low and even negative inflation rates in the eurozone and in the US, this theory gained momentum in academic circles. Indeed, central banks have had a hard time reaching their inflation targets." https://www.intereconomics.eu/conte...n-low-interest-rates-cause-low-inflation.html

Second, here I am speaking only of the central banking interest rate like the fed funds rate as such. Banks and others will continue to lend at non-0 interest rates, but it will be lower, say 2% instead of 4% and so on, since the central banking interest rate will be 0 or close to 0, ideally.

 

[XavierJesusLovesIndia]

On interest in the Bible, I'll start a new thread for that.

 

[ZNP]

Well, first, any thoughts on the fed funds interest rate being zero from 2009-2016 and the CPI inflation also being low? That shows low interest rates do not lead to high inflation. At best, their impact on inflation is minimal. Some have even argued low interest rates lead to low inflation.

"A new theory of interest rates, the Neo-Fisherian theory, predicts a low inflation rate due to a central bank’s low interest rate. After several years of near-zero interest rate policies and low and even negative inflation rates in the eurozone and in the US, this theory gained momentum in academic circles. Indeed, central banks have had a hard time reaching their inflation targets." https://www.intereconomics.eu/conte...n-low-interest-rates-cause-low-inflation.html

Second, here I am speaking only of the central banking interest rate like the fed funds rate as such. Banks and others will continue to lend at non-0 interest rates, but it will be lower, say 2% instead of 4% and so on, since the central banking interest rate will be 0 or close to 0, ideally.

No, you are talking about an overnight interest rate to banks. Calling that 0% doesn't have anything to do with the rest of the thread especially that quote you gave us from the Bible.

Mortgage rates, car loans, credit card rates, interest on the ten year, these are the key interest rates that are relevant.

The 10 year treasury rate is what many people use to value their investments. The long term average is 4.26%. The long term average for the 30 year mortgage rate is 7.76%.

Second you have the cart before the horse. This is the problem with all this modern monetary theory. They think they control the economy with the interest rate. That is backwards. The economy controls interest rates. That is why the Fed is raising the rate, they have no choice.

Many years ago the US was a major industrial manufacturing powerhouse with very low debt to GDP and essentially a creditor nation. That is not the case anymore. Dropping the interest rate is like stepping on the accelerator, raising the interest rate is like stepping on the brake. But if the engine is flooded or burning oil, or if you have a flat tire that is pointless.