Opinion

If money is practically free, why is nobody investing it?

Negative interest rates won’t help when it is clear that there are other reasons entrepreneurs have lost their mojo.

Stephen GrenvilleFormer central banker

Mar 1, 2021 – 2.32pm

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Paul Samuelson, the doyen of economic textbook authors, said that if inflation-adjusted interest rates were zero and expected to remain so, it would be profitable to flatten the Rocky Mountains in order to lower transport costs.

The US has had negative real rates for the entire period since the 2008 financial crisis. The Federal Reserve chairman has promised that this will continue for the foreseeable future. Yet the Rockies remain untouched. What has happened?

Stephen Grenville is a former deputy governor of the Reserve Bank of Australia and a non-resident fellow of the Lowy Institute.