Article discreditng the thesis that Mao "killed millions of people" in The Great Leap

[Jester]

I believe the extremely low rates have hurt (in discouraging savings) more than have helped (by encouraging borrowing/spending). The average person is unable to earn (or save for retirement either) an interest rate in CDs, Money Market or Savings accounts, and mostly being without the necessary investment knowledge is unable to leverage "free/cheap money" in the ways of those with financial wherewithal. Ergo, the accelerating gap between the fraction of "haves", and the "have nots".

One either wants more saving, or more spending. Can't have both, because they are opposite activities. The value of more savings is that it reduces inflation. The value of more spending is that it increases demand, raising wages and increasing employment. The second has clearly been of more value than the first, because unemployment has been high, and inflation has been low. That may be changing now, but only slowly over the last 8 years. (If anything, monetary policy has been too *tight*, as Scott Sumner would argue.) Raising the interest rate would have been a huge mistake. I still think it is, but at least the case for it is clearer today than for the past 8 years.

The average person's income is far more important than the rate of return on their accumulated wealth. If you have a saver who squirrels away $20,000, a huge amount for a poor family, a change in interest rates from 0% to 1% yields... $200. Do that every year for 20 years, and that same 1% interest now gives you... $4400. That's the change in income for someone with a whole lifetime of savings, nearly half a million dollars in the bank. This is just not enough to make a big difference in peoples' incomes, even for devoted savers.

The availability of more and better employment opportunities far outweighs the value of returns on savings, except for those who are *already* rich. Most people aren't. The value of a better job, or just not losing the one you have, vastly outweighs any conceivable advantage from higher interest rates.

-Jester