Could you explain this a bit more, or link to something that does? I'm don't know much about the Fed or the effect of bond interest rates. In particular:
1. The idea that interest rates should be high to prevent other, riskier investments, reads rather like we have to bribe investors into not gambling too much.
2. How do low interest rates 'refill the punch bowl', as you said?
3. How do they incentivize separating people from their money? The interest on those bonds is ultimately paid out of taxes, no? So wouldn't high interest rates be separating people from their money, making things better now at the cost of having to repay more later?
4. The bonds the government issues basically act as a loan the govt. takes from whoever buys the bonds, no? So shouldn't the interest rate be set as low as possible while there are still willing buyers?
Honestly none of this makes sense, and I'm pretty sure I'm missing something major.
1. The idea that interest rates should be high to prevent other, riskier investments, reads rather like we have to bribe investors into not gambling too much.
2. How do low interest rates 'refill the punch bowl', as you said?
3. How do they incentivize separating people from their money? The interest on those bonds is ultimately paid out of taxes, no? So wouldn't high interest rates be separating people from their money, making things better now at the cost of having to repay more later?
4. The bonds the government issues basically act as a loan the govt. takes from whoever buys the bonds, no? So shouldn't the interest rate be set as low as possible while there are still willing buyers?
Honestly none of this makes sense, and I'm pretty sure I'm missing something major.