It’s always been my understanding that left-of-centre economists, on the whole, like it when real interest rates are low (but not negative). Among other things, this encourages more companies to borrow (and hire more workers), reduces unemployment, reduces debt-servicing costs for government, and increases the power of labour.
In July of this year, I blogged over my concern that “important voices among Canada’s left are reluctant to stress the importance of maintaining (after a recession) very low real interest rates over the long term.”
More recently, I’m both concerned and puzzled to see a progressive economist implicitly argue in favour of raising interest rates in Canada. In his column in today’s Toronto Star, Tom Walkom writes:
Record low Canadian interest rates — another offshoot of U.S. attempts to devalue its currency — penalize those trying to live on their savings and, at the same time, encourage housing prices to career out of control.
Tom stops short of overtly advocating in favour of higher interest rates, and the entire column is certainly worth the read. But his negative spin on low interest rates takes me very much by surprise.
- Beating Back the Ghosts: Be Gone Appeals to Reinhart and Rogoff Authority. Welcome the Triumph of Reason. (April 16th, 2013)
- Ontario hiding savings from lower interest rates (October 15th, 2012)
- Household debt going from bad to worse (October 15th, 2012)
- Pour en finir avec la dette… (August 24th, 2012)
- Dead Money (August 23rd, 2012)