They learned through the Carter/Ragan recession what high interest rates in a recession slows spending. Only real way out of a recession is consumer confidence. If they have no faith in a recovery they don't spend money and hence the economy stagnates. If they feel that a deal is too good to pass up (low interest rates apply) they may spend anyway. Or at least that's what they are trying now. It seems to be helping us hold our own. Don't hear about Ford or GM laying off another 20 thousand every few weeks.
How many of us took on debt when the interest rates were 17-18%? Not I. Rates at 2-3.5% makes the idea of taking on more debt seem like a reasonable risk.
So the Fed has been holding down the rates. And when they are only making 2-3% on loans banks are not going to pay much more than 1% on deposits.
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Today's Featured Article - The Niagra View Mobile - Powered by a 1959 Ford Tractor - by Mark Massey. In 1959 the Niagara Frontier Transit Inc. of Buffalo, New York designed and built six Viewmobiles for the Niagara Frontier Sightseeing Inc. for use as a sightseeing ride at the Niagara Falls State Park, Niagara Falls, New York, powered by a 1959 Ford 611 Tractor.
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