Interest rates

Claude Bile

We are about to have an election here in Australia sometime shortly, in October, and the current Prime Minister, the incumbent John Howard (a.k.a Man of Steel), has adopted the slogan 'Keeping interest rates low'.

Are high interest rates a wholly bad thing, or are there upsides to having high interest rates?

My thought is that Howard is running a scare campaign, trying to frighten people into beleiving that if Labor get elected, then interest rates are going to suddenly skyrocket to 18% and everyone will be poor.

Feel free to enlighten me.

Claude.

russ_watters

Lower interest rates help stimulate the economy by encouraging people to buy on credit. There are two catches: going into debt and a too-good ecomomy causing a rise in inflation.

IMO, Greenspan has played it just right: he uses interest rates to help moderate the economic cycle. Its the reason he's been in his job through both Democratic and Republican Presidents and the reason (imo) that he has a larger influence over the economy than the President does.

Locrian

He may have kept his job, but Greenspan's understanding of the economy seems about as bad as anyone else's much of the time. Remember a few years back when he was worried we'd pay the national debt off too quickly, and did not forsee any serious correction due in the stock market?