Dropping interest rates on home loans to near zero percent rates would be one way the government could print more money and stimulate the economy, but it would damage the lives of millions of honest hard working people as taxes and inflation rose.
In such a low interest rate environments, debtors would be winners, and workers and savers would be losers. It would be a sign that the government is desperate, that printing presses are running, and that our leaders will do anything to save the economy ... including destroy it.
If our leaders become desperate, the fractional reserve could be raised to lets say 1 to 30. This would destroy the value of your savings, but banks could drop interest rates to 2 percent and still make money, especially if they paid savers less than 1 percent for their money.
Every dollar in your pocket is debt, an IOU from your government. This is why you and I need to be smarter and use good debt wisely. If we get into lots of good debt, we'll do our part to save the economy - and make ourselves richer.
Remember this, Japan's bubble burst over twenty years ago. They dropped their interest rates to less than 1 percent, and their economy still hasn't recovered. What if the US drops its interest rates and the economy still doesn't return. What will you do? That's an important question for you to ask yourself today... not tomorrow.
