Debts, Deficits and Interest Rates

Lorie Tarshis

Chapter 26 in The Economics of Imperfect Competition and Employment, 1989, pp 694-708 from Palgrave Macmillan

Abstract: Abstract Contemporary macroeconomists when asked about points of theory or details of policy, rarely answer with a single voice: the extraordinary diversity of their views is as dismaying to professionals as it is to the public. On only one matter do they all join in the same chorus: lower interest rates would speed up economic growth, reduce unemployment, ease the burden that debtors must now bear and probably reduce the country’s trade deficit. Recently, of course, all interest rates from those on overnight loans to those on terms of twenty-five years or more have fallen but they remain very high. Imagine how Keynes, who had anticipated with pleasure further declines in rates from the very low levels of 1935 and a hastening of the ‘euthanasia of the rentier’, would feel if he knew that in February 1986 long-term corporate bonds in the United States yielded 9.67 per cent (and only 3.4 per cent in 1935) and ninety-day treasury bills, 7.06 per cent (as against 2.25 per cent in 1935).

Keywords: Interest Rate; Money Supply; Financial Asset; Credit Market; High Interest Rate (search for similar items in EconPapers)
Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-08630-6_26

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DOI: 10.1007/978-1-349-08630-6_26

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