/biz/ - Business & Finance

>>51718948
It is really simple. In the fiat era economists far underestimate the effect of printing money because it is supposedly much easier to deal with the effects now, and it has worked in the past. They far overestimate the effect of macro conditions such as interest rates and and real price increases in comparison.
Therefore, they feel confident that they can just print money in the short term, aid the economy, raise interest rates to tame inflation and remedy it by opening the low interest rate cash casino in the medium term. However, this assumption assumes that the economy does recover from the increase in spending and cash flow. If/when it doesn't then interest rates can't comedown to stimulate the economy, and inflation either grinds on or interest rates go up further, hurting the economy even more. This is what happened in Japan...
The print, raise interest rates, lower interest rates formula is like playing Russian roulette because eventually you will reach a point where the money printing does not remedy the economy, leading to the inability to use interest rates, as lowering them will cause inflation, and raising them will further damage the economy.
After that happens its like picrel. No amount of perpetual low interest rates will reopen the easy cash casino