They learned through the Carter/Ragan recession what high interest rates in a recession slows spending. Only real way out of a recession is consumer confidence. If they have no faith in a recovery they don't spend money and hence the economy stagnates. If they feel that a deal is too good to pass up (low interest rates apply) they may spend anyway. Or at least that's what they are trying now. It seems to be helping us hold our own. Don't hear about Ford or GM laying off another 20 thousand every few weeks.
How many of us took on debt when the interest rates were 17-18%? Not I. Rates at 2-3.5% makes the idea of taking on more debt seem like a reasonable risk.
So the Fed has been holding down the rates. And when they are only making 2-3% on loans banks are not going to pay much more than 1% on deposits.
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Today's Featured Article - History of the Nuffield Tractor - by Anthony West. The Nuffield tractor story started in early 1945. The British government still reeling from the effects of the war on the economy, approached the Nuffield organization to see if they would design and build an "ALL NEW" British built wheeled tractor, suitable for both British and world farming.
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