100 years ago a Swedish Economist explained why the current monetary stimulus does not work.
Knut Wickell believed there was two rates of interest. 1) the natural rate of interest and 2) the lending rate.
Very simple idea that is forgotten by geniuses on Wall Street. If you read Knut Wicksell’s idea about the cumulative process, you will understand price movements and maybe economic cycles.
Wickell’s interest rate theory
Its the interaction of the natural rate of interest and the lending rate of interest that determines movement in prices and markets. If the profit rate is 1% an interest rate of 1.5% is still not low enough. This is why we usually see falling prices in falling interest rate cycles, rather than the converse. Wow. Further, this is why we see low interest rates and no economic reaction. I could go on but if you want to learn more about the economy, interest rates and prices read Knut Wicksell.
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