We already had way too much government investment encouragement with artificially low interest rates for years. People do not need more incentives to spend. btw, we still have rockbottom low interest rates.
What happened in this crisis is over-investment and over-supply. That waste needs to be rolled back and we need to get back to a balanced budget - which is what Brazil did - it's not even mentioned in that article all the strict fiscal policies Brazil enacted like a balanced budget amendment!!!
The easy money policy causes businesses and people to borrow money they do not have (debt) in false expectation of future profits/income, and they spend money wastefully because they think they have more than they do have.
Now people must save and recapitalize and pay off debt. Some bsinesses must fail. Real estate prices must fall. Public expenditures must be reduced.
People are NOT hoarding cash. Ridiculous. Businesses are saving because look ahead and they know rates will have to increase and the hardships are not over. They are are borrowing at low rates in expectation of higher rates in the future (it would be more expensive to borrow in the future when rates rise)
Capital that was malinvested during the boom period has to be accumulated again to return to previous productivity levels. The method to accumulate capital is saving.
That graph doesn't show that people are hoarding cash, it shows that they are saving. If they're investing in stocks the money doesn't go out of circulation and if they put it in a bank it mostly doesn't go out of circulation. All of which isn't to say that there are people or institutions hoarding money, only that your graph is irrelevant to that.
What happened in this crisis is over-investment and over-supply. That waste needs to be rolled back and we need to get back to a balanced budget - which is what Brazil did - it's not even mentioned in that article all the strict fiscal policies Brazil enacted like a balanced budget amendment!!!
The easy money policy causes businesses and people to borrow money they do not have (debt) in false expectation of future profits/income, and they spend money wastefully because they think they have more than they do have.
Now people must save and recapitalize and pay off debt. Some bsinesses must fail. Real estate prices must fall. Public expenditures must be reduced.
People are NOT hoarding cash. Ridiculous. Businesses are saving because look ahead and they know rates will have to increase and the hardships are not over. They are are borrowing at low rates in expectation of higher rates in the future (it would be more expensive to borrow in the future when rates rise)