Originally Posted by
ZenOps
I've always likened borrowing to game theory. You have savers and spenders, same as hawks and doves. If everyone is a saver, its bad. If everyone is a spender, its bad.
Interest rates are simply the mechanism that brings spenders and savers into equilibrium. Everyone from the boomer generation just assumed that there would be perpetual growth forever (too many hawks). The natural place for interest rates to be might actually be negative, which is an outright foreign idea - but Japan is pretty much full onboard with the idea.
I see the "distortions" as a return to free economies. People will pay what they think its worth, sellers can raise prices to see if anyone "bites" - a return to *somewhat brutal* capitalism by todays standards. Putting a life savings in a bank at 18% interest (1960's) ultimately rewards laziness.