At 1:25 PM 1/26/95, [EMAIL PROTECTED] wrote:>Doug Henwood, seconding Gene Coyle's views, writes: >"The price of credit matters much less than its availability, >and the willingness of borrowers to use it." > >Won't credit be made available if the price is high enough, >and borrowers more willing to use it if the price is low enough? >A two percent decline in mortgage rates led million to refinance >their mortgages (not a small factor in freeing income for >consumption to fuel the recovery from 1990-1991) Real >estate development, construction, retail and wholesale trade, >indeed, all businesses in which capital takes mainly the form >of inventories, remain interest rate sensitive. Sure these price effects happen, but it took very high rates for a long time for Volcker to accomplish his work. And low rates can often take a long time to work their stimulus - like forever in the 1930s, and a year or two in the early 1990s. Investment spending responds less to interest rates than sales and profit growth. >Anyway, it doesn't make sense to discuss the effects of >interest rates without a context: a/ yield curves; b/ inflation >rate; c/ profit rate; d/ employment level and degree of expected >employment security Q to name a few "contexts." Sure let's discuss those. What about them? Doug -- Doug Henwood [[EMAIL PROTECTED]] Left Business Observer 250 W 85 St New York NY 10024-3217 USA 212-874-4020 voice 212-874-3137 fax
