It wasn’t a stimulus. That’s the point. It wasn’t consumer driven. It was millions of spoons digging a hole for no point other than to provide a job that has no production. Without production to consumers then those industries do not get any money from real savings put back into the industry. It was credit-driven from the start and not savings driven. There wasn’t any money in the housing sector like everybody thought. That’s why houses and thus mortgages were loaned out but not paid back. There were NO savings to pay back the credit. No consumers - who have savings - to pay back the credit. If there is no consumers, in other words, no money, no savings, going into the housing sector, but houses are being built, but no real savings going in, then that’s not a stimulus. That’s not being productive. There was NO money going into the housing sector. If there was no money, no real savings going into the housing sector, then how is anybody going to make money off of it? If some people are not getting any money in return for building those houses, then how those those house builders going to not only get money in return for their labor but how are they going to remain unemployed? From the very beginning, because it was built on credit and not on savings, which goes against the whole title of this thread because you assume there are savings when obviously there was NOT.
If I go and buy bread but don’t have any money how am I supposed to get that bread? If I don’t give the store money for their bread, then how is the store going to employ anybody? If the store doesn’t get money back for making its bread, then is that store going to remain open? Are there going to be jobs at a place that doesn’t get any returns on it’s product because nobody is going into the store with money to buy the bread?
The Fed. needs to stop artificially lowering interest rates. The Fed. needs to stop messing with the money supply thereby devaluing the dollar, making people poorer because their dollar is now worth less. The gov’t needs to get out of the market and stop regulating and skewing/distorting where the real market demands are, ie. Fannie and Freddie Mac (gov’t institution) made available high risk loans but since it was backed by the gov’t it seemed secured when it wasn’t because of the burst of the bubble shows it wasn’t. The effect of the Fed. Reserve interest rate manipulation creates an artificial demand that is credit driven (because the loan rates are low) and is not consumer driven (the loan rates are low not because consumers are driving them low but because the fed. drove them low). When the Fed. drives the interest rates lower than what the actual consumer market is demanding, then loans are given out without anybody to actually buy up the products that are being made based on the loans, ie. credit.
The natural interest rate goes low because it is a signal that NO consumers are buying or no investors are investing. So the natural interest rate lowers and consumers/investors are encouraged by such low rates to buy up loans. Yet when rates are artificially lowered, it is NOT because consumers/investors are NOT buying the loans. They are and have been buying up the loans. So the artificial lowering is a false signal. It makes cheaper, riskier loans available for people that would not be actually getting the loans if the natural interest rate was present. Because since consumers/investors have been buying up the loans, then the natural interest rate would be going higher. It would signal to the investors that, that part of the market isn’t getting the consumer demand anymore, so, the investors invest in another part of the market where interest rates are lower. The marginal values of some investors go to these lower interest rate markets/products because they didn’t have the money for the higher interest rate market (because they have to pay back more on the loan and don’t want to take the risk of not being able to pay it all back). So these investors move to lower interest rate markets that if naturally lower, are thereby caused by consumer demand. That part of market has actual buyers for the product. It is not artificially or distorted that there are consumers present (like when the fed. lowers it), but that there are actual consumers driving that interest rate lower. And when that part of the market has too many consumers compared to supply, then the interest rates naturally go back up to balance off the supply and demand. Then the investors move to another part of the economy and invest where lower interest rates exist, meaning, taking the risk on a product that has high supply and consumers if they keep buying the product, the supply drains, and then interest rates naturally go up. Investors move.
But the Fed. is artificially lowering interest rates thereby creating malinvestments and eventually unemployment because there are no people actually present to buy those loaves of bread.