Richardcyoung.com

  • Home
  • Debbie Young
  • Jimmy Buffett
  • Key West
  • Your Survival Guy
  • How We Are Different
  • Paris
  • About Us
    • Foundation Principles
    • Contributors
  • Investing
    • You’ve Read The Last Issue of Intelligence Report, Now What?
  • The Swiss Way
  • My Rifles
  • Dividends and Compounding
  • Your Security
  • Dick Young
  • Dick’s R&B Top 100
  • Liberty & Freedom Map
  • Bank Credit & Money
  • Your Survival Guy’s Super States
  • NNT & Cholesterol
  • Your Health
  • Ron Paul
  • US Treasury Yield Curve: My Favorite Investor Tool
  • Anti-Gun Control
  • Anti-Digital Currency
  • Joel Salatin & Alfie Oakes
  • World Gold Mine Production
  • Fidelity & Wellington Since 1971
  • Hillsdale College
  • Babson College
  • Contact Us

Fed’s Low Interest Rate Strategy Is Killing the Incentive to Earn and Save

May 1, 2014 By Richard C. Young

Here Cato Institute Senior Fellow Alan Reynolds chronicles the soaring number of Americans not working due to misguided Obama administration policy.

Federal Reserve efforts to keep interest rates absurdly low have reduced the incentive to earn and save money for the future while encouraging risky debt and dodgy investments. Flattening the yield curve through Fed purchases of long bonds made it less profitable for banks to lend to small business.

The fact that employment has gradually risen from 140 million to 145.7 million since the recession ended is unremarkable. What is truly remarkable is that at the same time that job opportunities improved, the number of Americans who were neither working nor seeking work soared from 80.9 million to 91.4 million.

One economist who understands the importance of work disincentives is University of Chicago economist Casey Mulligan, author of “The Redistribution Recession” (2012), who first blew the whistle on punitive work disincentives in ObamaCare.  Another is Nobel Laureate Ed Prescott, who demonstrated on this page (“Why Do Americans Work More Than Europeans?” Oct. 21, 2004) that the people of France are a third poorer than Americans only because they were deprived of incentives to work—by onerous marginal tax rates on excess effort and generous subsidies to indolence.

The demand-side panacea for weak economic growth has encouraged families and firms to spend a larger fraction of their current income and wealth—by using tax and monetary policy to punish savers and reward debtors. A supply-side solution would incentivize families and firms to produce more income and wealth by minimizing unpredictable regulation and litigation, trade barriers, unreliable money and dispiriting tax rates.

Demand-side economists focus on incentives to borrow and spend. Supply-side economists focus on incentives to work, save, invest and launch new businesses. Demand-side economists focus on the uses of income and debt (consumption). Supply-side economists focus on sources of income and wealth.

From the perspective of demand-side bookkeeping, the fact that consumer spending in 2012 accounted for 68.6% of GDP supposedly means economic growth depends on consumer sentiment. Viewed from the supply side—the sources of GDP—private industry accounted for 86.5% of GDP. If private businesses had not produced $14.1 trillion, consumers could not possibly have consumed $11.1 trillion. Economies do not grow because consumers spend more; consumers can spend more only if economies grow.

The time for demand-side gimmicks has long passed. The remarkably aggressive fiscal and monetary effort to stimulate demand did not stimulate demand. Even if it had worked, we can’t pretend to be “fighting recession” forever. Today’s economic predicament is not a cyclical crisis but a sustained, subsidized lethargy. Different tasks require different tools. When the number of job seekers falls twice as fast as the increased number of jobs, that is a supply-side problem.

 

If you’re willing to fight for Main Street America, click here to sign up for my free weekly email.

Related Posts

  • The Fed Tax on Savers: Low Interest Rates
  • Low Interest Rates Threaten Insurers and Baby Boomers
  • Grass Fed
  • Author
  • Recent Posts
Richard C. Young
Richard C. Young
Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.
Richard C. Young
Latest posts by Richard C. Young (see all)
  • How Healthy Are Eggs? - July 8, 2025
  • HUD: The Damage Caused by Federal Housing Intervention - July 8, 2025
  • Can Elon Musk Break the Two Party System? - July 8, 2025

Dick Young’s Must Reads

  • Government Should Be Small, Laws Unobtrusive, and Men Left Alone
  • Gstaad and the Swiss Way
  • For Whom Is Your Portfolio Serving?
  • Joel Salatin Can Help Americans Beat Food Inflation
  • Warning! Your Survival Guy’s on a Boil Water Advisory
  • The Clock is Ticking: You Must Protect Your Family
  • Your Sheriff Is Your Friend
  • Remembering Brent Scowcroft
  • Gold’s 50-Year Price Explosion
  • Your Sheriff Can Thwart Federal Gun Control Efforts

Compensation was paid to utilize rankings. Click here to read full disclosure.

RSS Youngresearch.com

  • Your Survival Guy: “You Wouldn’t Have Liked It”
  • DOE Unveils Plan to Quadruple U.S. Nuclear Power by 2050
  • How China Weaponized Rare Earths to Shift U.S. Trade Policy
  • Trump Administration Moves to Curb Foreign Ownership of U.S. Farmland
  • We Finally Got on the Boat
  • Trump Flexes Tariff Power Ahead of August 1 Deadline
  • America Remained a Net Energy Exporter as Domestic Output Soars
  • Copper Prices Surge as Global Supplies Tighten
  • Happy Independence Day!
  • Survival Guy: An All-Weather Balanced Portfolio

RSS Yoursurvivalguy.com

  • Your Survival Guy: “You Wouldn’t Have Liked It”
  • ESG Doesn’t Stand Up to Scrutiny
  • How to Dock a Boat with Helm Master EX
  • We Finally Got on the Boat
  • The Big Beautiful Bill: Good, Bad, and Ugly
  • WARNING: Your Survival Guy and Gal in the Fog
  • Happy Independence Day!
  • Survival Guy: An All-Weather Balanced Portfolio
  • A Bazooka Fired at Private Equity
  • NYC, Crypto, ESG, the Haves and the Have-Yachts

US Treasury Yield Curve: My Favorite Investor Tool

My Key West Garden Office

Your Retirement Life: Traveling the Efficient Frontier

Live a Long Life

Your Survival Guy’s Mt. Rushmore of Investing Legends

“Then One Day the Grandfather was Gone”

Copyright © 2025 | Terms & Conditions | About Us | Dick Young | Archives