Industrial Insight

Interest rates falling for three decades | April 14, 2014

https://www.project-syndicate.org/commentary/barry-eichengreen-examines-competing-explanations-for-three-decades-of-decline-in-real-interest-rates

….the only explanation still standing is the shift in the composition of activity away from capital-intensive forms of production, like manufacturing, to less capital-intensive activities, like services.

If the disorder has multiple causes, then there should be multiple treatments. There should be tax incentives for firms to hire the long-term unemployed; more public spending on infrastructure, education, and research to compensate for the shortfall in private capital spending; and still higher capital requirements for banks and strengthened regulation of nonbank financial institutions to prevent them from excessive risk-taking.

eichengreen66chart

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