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EconoMeter: Are low interest rates enough to spur economy?


Sunday, September 5, 2010

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Kelly Cunningham: National University
No: Interest rates have been very low for a while and not spurred much consumer spending or businesses to start hiring.
The problem is a still fundamentally flawed, over indebted economy. Interest rate cuts do not have the same impact when households are debt-constrained, and financial institutions are uncertain about the value of collateral underpinning their loans. Tax cuts and spending programs, coupled with non-sustainable interest rates, may spur some growth.