Zero interest rates = Zero GDP growth
In Japan you can borrow at almost zero for the past 10 years and GDP, Real Estate & Stock's have moved zero! 10 years ago Nikkei was at 15,000 and now is still at 15,000.
Why when rates stay at zero the economy stall's, why?
a)Joseph Schumpeter believed that wealth and growth is created as capital moves
from weak hands to strong hands. This cannot happen if capital has no cost. We
have seen this in Japan, where zombie companies can survive forever, thanks to
cheap capital injections, and prevent the re-allocation of scarce resources (land,
labor, capital…) to managers best able to maximize returns. In Schumpeter’s
world, the willingness to let inventions/more efficient operators kill obsolete
businesses is key to societal progress. (From Gave Kal, The High Cost of Free Money)
b)People who have savings and were used to make a good living from getting money from deposits (My Mother) now live with much less money. What do they do, cut big time on expenses.
So once the market get's used to low rates the economy & the stock market is going to stall. However in Germany & in the US 10 year rates are still falling and that helps the market. I guess as long as the graph is from the upper left to the lower right stocks can climb a bit more.
Once you get to zero everything is going to stop.
Share story
0 comentários: