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[–] ForTheUltimate ago
I'm afraid not. My conclusion was strengthened after going the data and your arguments.
The malinvestments are liquidated every recession. Interest rates were never increased past the preceding recession's peak interest rate without causing a recession.
[–] CanIHazPhD ago
And these magical malinvestments respond to some hikes on the interest rates (2004-2007) but not anothers (88 and 94), and they respond to short term changes but not long term ones, but that just in the 2000's but not for the 1930's, they happen during deflation (1836-43) and inflation (20th century) and basically whenever they support your theory, but not when they contradict it...
Yeah, right.
[–] ForTheUltimate ago
Not necessarily. A recession doesn't mean that there were malinvestments caused by artificially low interest rates. I do remember there was a central bank goign in and out and certianly there are other reasons to explain recessions, but that's besides the malinvestments theory.
Thanks for pointing it out. the hike in 88 was not as significantly above that average for the period since the last recession unlike 2004-2007. The period of 94 did not have as big a drop in interest rates on average from the peak as 2004-2007 also the period where it was much lower was 2 years long, which does raise concerns for the theory.
In the end, there are other factors and for the 94 period, the euphoria of the .com boom have likely sustained the malinvestments (kinda obvious right?) that interest rates would normally sustain.
And regarding there being other factors, that's why basing your economic knowledge on empirical data first is dangerous like basic your hard science knowledge on uncontrolled experiments that can't be repeated with slight modifications.