Effect of Interest rates on investment

Jan, welcome. A relevant post/thread here.

Thomas E Woods provides an answer to this object in his book Meltdown. He says the following:

“A reasonable objection to the Austrian explanation runs as follows: why can’t businessmen simply learn to distinguish between low interest rates that reflect an increase in genuine savings, and low interest rates that reflect nothing more than Fed manipulation?..The answer is that it is not so easy. (First of all even most economists are unaware of Austrian business cycle theory, and it is a rare business school in which the subject is taught.) Even businessmen who do know the Austrian theory and who know with absolute certainty that the Fed is keeping interest rates artificially low may still find it in their interest to borrow and launch new projects, hoping their project will be one of the lucky ones and that they can get out well before the bust hits. If they sit back and do nothing, and do not react to the lower rates, their competition surely will, and might be able to gain market share at their expense.****” pg75-76