Promoting Savings

Greenspan’s admits flaw in hands-off approach, pity it’s a decade too late:

And when Greenspan told consumers to take out adjustable-rate mortgages at the height of the housing boom, while opposing limits on predatory lending, he turned a wilfully blind eye to the potential for disaster.

Wait, wait, can I be a Monday morning quarterback?  Actually I voiced this opinion, that interest rates were way too low, way back in 2001 and 2002, but hey, who was listening?

I think that when interest rates are too low people:

  • have no incentive to save (especially when the president of the US and society are chanting “Spend! Buy! Spend! Buy!”)
  • who have some extra money, after the buying spree, put their money in more risky ventures (stock market) in order to get some sort of return
  • are more likely to borrow money to go on a shopping spree
  • have an easier time borrowing money to put into risky ventures (imagine casinos giving $100K credit lines to any gamblers who walk in?)

When did we go from promoting savings, to judging our economic success on how much we bought at the holidays?

-mz

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~ by mz on October 30, 2008.

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