The Fed wants savers to invest in riskier things -- new businesses, new projects, expansions, etc. -- so it has pushed rates on safe investments like treasuries to zero (three-month US treasuries pay 0.01% right now). The idea is that this will provide an incentive for savers to invest in things that will produce economic growth.
Yet despite the Fed's success at pushing rates down to zero, savers still want to invest predominantly in assets perceived to be safe (like treasuries and FDIC-insured bank accounts).
When consumers are strapped under the yoke of debt and can't buy more stuff on credit, no government effort to get businesses to invest more can work...
* The idea that private-sector debt might be the cause of a depression has not been influential in academic circles "because of the counterargument that debt-deflation represented no more than a redistribution from one group (debtors) to another (creditors)." ( Ben Bernanke, 1995 --http://fraser.stlouisfed.org/docs/meltzer/bermac95.pdf )
The research by Sufi and Mian tears a big hole in these arguments.
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[ 0.22 ms ] story [ 17.2 ms ] threadYet despite the Fed's success at pushing rates down to zero, savers still want to invest predominantly in assets perceived to be safe (like treasuries and FDIC-insured bank accounts).
When consumers are strapped under the yoke of debt and can't buy more stuff on credit, no government effort to get businesses to invest more can work...
* "What is killing the economy is lack of credit" -- http://www.nytimes.com/2011/09/20/opinion/nocera-no-extra-cr...
* The idea that private-sector debt might be the cause of a depression has not been influential in academic circles "because of the counterargument that debt-deflation represented no more than a redistribution from one group (debtors) to another (creditors)." ( Ben Bernanke, 1995 --http://fraser.stlouisfed.org/docs/meltzer/bermac95.pdf )
The research by Sufi and Mian tears a big hole in these arguments.