[LordOfTheShrooms]

It's inevitable.

This is the inherent problem with fucking around with the money supply. Healthy borrowing can only come from real savings. The function interest rates serve is to coordinate production across time. When people save money, it's implicit that they intend to consume in the future. The increase in savings provides a increase in loanable funds, which drives interest rates downward. This acts as a signal the businesses to invest in long term projects to meet the future demand. When people are saving less, they're obviously consuming more now, and interest rates will be higher as a result of the lower supply of loanable funds. Businesses react by concentrating on short term projects to meet current demand. Additionally, the long term projects wouldn't be profitable at higher interest rates.

When a central bank artificially lowers interest rates (fractional reserves also contribute heavily to this, and were largely responsible for the market crashes before the Federal Reserve), it mucks up the process. Businesses invest in long term projects to meet future demand, even though consumers have given no indication that they want to stop consuming in the present and save to consume in the future. The bubble pops when it becomes apparent that there aren't enough resources or demand for adequately support all of the long term projects undertaken by businesses in response to low interest rates.

Worse yet is that some people invariably realize that the interest rates don't match up with consumer desires, but undertake long term projects anyway because they have to, since their competition certainly is. Or even worse, in the case of large corporations, they undertake the long term projects because they know they'll get bailed out by the government if things go south.


It irritates me when people like Alex Jones go on and on about the Federal Reserve and their sinister motives. It doesn't even matter if any of what he's saying is true: it comes off as tinfoil hat bullshit and makes it difficult to have any rational discussion on the subject. Much more could be accomplished, I think, if it was attacked on purely economic grounds. If you talk about the "Bilderberg Group" or "foreign bankers" people are going to roll their eyes at you and tune you out. If you talk about the tldr crap I wrote above this paragraph, their eyes might gloss over because most people can't comprehend economics, even put in laymen terms as above, but you won't be disregarded as a moonbat, and the groundwork for real discussion and healthy criticism is layed.