tag:blogger.com,1999:blog-1240730580083032584.post8217086149131057648..comments2024-02-26T22:53:09.562-08:00Comments on Money, Markets, and Misperceptions: Savings ≠ Investment: Keynes's Peculiar Economic Theory from Peculiar Economic TimesUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1240730580083032584.post-26161118024715856102014-06-12T20:14:01.087-07:002014-06-12T20:14:01.087-07:00You seem to be suggesting a third case: the intere...You seem to be suggesting a third case: the interest rate fails to reach a level that clears the loan able funds market due to some impediment, legal or otherwise. I don't see how you are critiquing my point about severe deflation and nominal rates. You might make an argument that expected inflation was not as negative as actual inflation, but in principle that does not seem a problem. Am I misreading you?James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-3430504853064165192014-06-12T19:58:11.019-07:002014-06-12T19:58:11.019-07:00James:
Your first case makes sense.
Your second ...James:<br /><br />Your first case makes sense.<br /><br />Your second case does not. Suppose that the interest rate cannot fall to equilibrate desired S and I. (Maybe it's against the law to borrow at less than x% interest). So there is an excess demand for bonds. Everybody wants to buy bonds but nobody wants to sell bonds. So people are unable to buy bonds. So what do they do with their income, if they can't actually buy bonds? Either they hold it as money (which is back to your first case), or else they shrug their shoulders, and buy goods instead.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.com