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Comment by jerf | Hacker News Reader

"I'm young and have a mortgage and car payment."

Your mortgage costs more because interest rates are low, making lending easy, making it easy to take out loans, meaning all the buyers can get bigger loans, meaning you have to bid more to win.

Second order effects. Interests rates are not low in a vacuum.

It is likely that because there's nowhere else to make good returns, there's a lot of money sloshing into stupid non-value-focused dotcoms that will dry up when interest rates go back up, creating competition for those dollars. Again, second order effects. You're not thinking economically if you're not thinking about those.

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> Interests rates are not low in a vacuum.

This is true in almost exactly the reverse of the sense you intend; interest rates are low as a fairly direct result of poor results on a number of economic measures; its true that the conditions in which low interest rates occur are bad, but that's not because of low interest rates, it is what low interest rates are a response to.

Inflation in prices is one of the signals which leads to higher interest rates. (While there are some wrinkles, pretty much the main purpose of monetary policy is short-circuiting destructive positive feedback loops in the economy by introducing negative feedback mechanisms to counteract them.)

>"Second order effects. Interests rates are not low in a vacuum."

Uh, no. My mortgage is inarguably cheaper due to low rates. So is my car payment.

Is it possible that the price of the asset I'm borrowing against is higher because low rates are inflating asset prices? Possibly. It depends where I live and when I bought my house. If I just re-fi'd at lower rates, it's cheaper, period. Besides that, the inflated price shows up as an asset on my personal balance sheet.

These second-order effects are relevant, but not substantial.

"Besides that, the inflated price shows up as an asset on my personal balance sheet."

Until interest rates go up and it deflates again. That's not a reliable asset.

With all due respect, you really don't know what you're talking about here. Your model of economics is too linear and static.

>With all due respect, you really don't know what you're talking about here.

Benefits of interest rates are ambiguous, as I argue. Inflated asset prices benefit asset owners, as I argue:

https://www.stlouisfed.org/publications/inside-the-vault/spr...

>Until interest rates go up

Yeah, 24 years later and Japan putting up interest rates is just around the corner.

When policies last for entire generations treating them as a temporary aberration is a mistake.

The interest rates have a substantial effect on the price of houses. It's the same with the price of education.

"Is it possible that the price of the asset I'm borrowing against is higher because low rates are inflating asset prices? Possibly."

Is it possible that 1 + 1 = 2? Possibly. Does a bear shit in the woods? Possibly. Is the pope a catholic? Maybe. Do low interest rates spur inflating asset values? Absofuckingloutely.

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