Interesting discussion about recognizing one of our economic problems as being the incentive for wealth to be invested instead of merely loaned. Apparently this means limiting its liquidity and creating incentives for wealth to be locked up in productive activity rather than just loaned out in liquid fashion to profit on interest.
This discussion – to the extent I understand it; and I confess I’m no expert – ties in with some of the themes of Wealth and Democracy by Kevin Phillips and what he calls “financialization.” He looked at previous empires in decline and found that a lot of their economic activity got tied up in, basically, moving paper around instead of actually producing anything terribly useful and that this precipitated their decline.
I can see that. The Federal Reserve’s interest rate policies are certainly to blame for that. You just can’t make any money in an interest bearing bank account, you can’t even keep up with inflation. This has been the case since at least the 2000 stock market crash.
I just finished Ron Paul’s “End the Fed”, so I’m in a very anti-Federal Reserve mood, and he talked about this topic at length.
Everybody is chasing returns, and the only way to do it is investment in rather risky assets. When an asset appears to have a good return, everybody piles in, causing a bubble. We’ve been moving from one bubble to the next for the last 20 years, maybe longer.
Much like Doug’s assertion that the evidence shows that low taxes don’t create jobs, I think a nice PhD dissertation could be written showing that low interest rates don’t create jobs either.