Common Sense Economics
13 Pages Posted: 17 Aug 2019
Date Written: August 12, 2019
For decades Wall Street professionals and academics have been perplexed by decreasing interest rates in the United States in an environment of increasing debt. This focus on the supply of debt has led to many failed prognostications regarding impending interest rate increases. The bond vigilantes of 1980 have given way to current incoherent talk of central bank financial repression. This analysis looks at wealth inequality and the demand for debt and shows how it causes interest rates to decrease and how wealth inequality stalls the consumer-demand side of the economy. Wealth inequality leads to an unbalanced economy just as total wealth equality would also lead to an unbalanced economy. Interest rates are the signal telling us about the spread of wealth distribution in the economy and the balance we need to strike.
Keywords: wealth inequality, income inequality, interest rates
JEL Classification: G1
Suggested Citation: Suggested Citation