I'm definitely no economist - and have given up on the idea of figuring it all out. I tend to be an intuitive Austrian, i think.
Besides the dilution of the currency (which is a form of stealing) the government creates additional uncertainty. No one can predict what they'll get into next. Like it happened under Roosevelt, private capital went on "strike". You basically have to, since the normal price discovery mechanisms do not function.
I had to do some home improvements, and could hardly find people available in this semi-rural area. "Stimulus" projects took up so many construction workers that they became unavailable, and anything they do is expensive. Is this a misallocation of resources? Could it be that some day I may be happy about those government projects? I don't know. in the meanttime, what I do know is that my taxes (and a dilution of my dollars) are paying for those projects -- and I also pay a premium for my personal construction needs.
I mean, if there hadn't been a huge demand for gov't debt, rates should be much higher than they are currently, right?
Don't know. The Fed is - I'm told - the largest buyer of US debt, keeping rates low. To me, that's the same as using Visa to pay off Master Card. (edit - perhaps, more like using a printing press to pay off Master Card).
part of the reason that private finance is unwilling to lend is due to the lack of financial surety as that sector has been decimated. No means of insuring against financial risk, no lending.
"Insurance" against lending risk in a bad economy are higher rates - but rates are kept low. They are not determined by the markets. Additionally, there is really no significant demand for loans. In this respect, low rates represents pushing on a string.
It appears to me that without all the massive confusion and uncertainty created by government meddling the economy would have an easier time sorting things out. |
