Were interest rates to low during this decade?

[Free Trade is managed by the invisible hand.]

I am just wondering because how would we determine when the federal reserve discount rate is too low?


also what about other "interest rates" that were in the market during that time period?(for example MBS,ARMS,CDO's,CDS). since i am a noob to economics, i am basically taking the shot gun approach hear and assuming that financial institutions have their own interest rate policy as well.

also doesn't private debt increase the nominal interest rate?

[phk]

There is the Taylor Rule.

[Free Trade is managed by the invisible hand.]

There is the Taylor Rule.

This is Glenn Rudebusch version of the "taylor rule", and their is a debate going around as to which rule should be followed.
Target fed funds rate = 2.07 + 1.28 x inflation – 1.95 x excess unemployment

[Bo]

Yes. How do you determine what interest rates should be?--Let the market decide and determine interest rates.

[○∙◄☻¥tπ[╪AV┼cVê└]

Of course it was low in 2004. Bush needed to be re-elected.

[phk]

Of course it was low in 2004. Bush needed to be re-elected.

Too low in 2002-2003 as well. Cheney pressured Greenspan to keep the rate low because of anemic job numbers.

[Bo]

Of course it was low in 2004. Bush needed to be re-elected.

Too low in 2002-2003 as well. Cheney pressured Greenspan to keep the rate low because of anemic job numbers.

Maybe the GOP should have passed a stimulus package instead of keeping rates too low. It would have been better for the economy and for Bush's reelection prospects and legacy.

[Mr.Phips]

This time, Bernanke is going to have to keep them around zero until unemployment falls below 9%. 

[Free Trade is managed by the invisible hand.]

how do we know when interest rates are too low


sure there is the taylor rule and their variations.

[phk]

Of course it was low in 2004. Bush needed to be re-elected.

Too low in 2002-2003 as well. Cheney pressured Greenspan to keep the rate low because of anemic job numbers.

Maybe the GOP should have passed a stimulus package instead of keeping rates too low. It would have been better for the economy and for Bush's reelection prospects and legacy.

His re-election prospects would have stayed the same, but his legacy sure.

Rather, I wish interest rates were kept relatively stable and we just let all the "mess" clean out of our system. Though the super-anemic job creation would nullify any chance of that.

Gore may have been better for that actually. He would have probably realized his chances of getting re-elected were pretty close to nil in 2004 and might not have pressured Greenspan into having lower rates.

[Derek]

I don't think interest rates would have needed to go up if less people are qualifying for loans.

[phk]

Waaaay too many ing NINJA loans.

[Derek]

Agreed! ^^