Question

Please Write a paragraph about how was the low interest rates during the Great Depression

Answer 1

Low interest rates is one of the ways the Fed has of stimulating the economy. The cost of borrowing money is greatly reduced when they rate is lowered even by 1/2 a point.

The Fed did everything it could to stimulate the economy. Unfortunately during a deflation, which is the way America experienced the depression, it was hard to stimulate anything. People did not have the money to spend. The banks were not going to make loans to people who had no jobs and no why to create capital themselves. There was a stagnation that low interest rates did not cure.

If they go into a depression this time, there will be super inflation which is the way Germany went through the depression. The money was not worth the paper it was written on. And the problem was that the control of currency (which is usually controlled with higher interest rates was going to be disastrous. Depressions of any kind are no fun at all.