How much stupid *is* in the economy?

I have a confession: much as I consider myself a numbers person and follow business, economic, and finance news, there is a lot that I still don't "get". I realized this week that most of it comes down to my extremely conservative nature when it comes to money. If I were going to invest in stocks, I would do it because I had researched the intrinsic value of the company and had good reason to believe that it would do well in the future. If I were going to invest in bonds -- which I had always been told before this month were so safe that they were boring and should be avoided for that reason alone -- I would do so because I believed in the strength of the entity selling it and hold it until it matured; hell, I would probably reinvest the funds after. It took me a while to remember that most people do not see their investments that way; they do not look at the long-term, and many don't even look at the medium-term. They are super-sensitive to every hiccup and will bail if they see enough people doing so, just as they will invest in something if they see enough people doing so. I have always been distrustful of the crowd, which is why I remain hesitant to trust this very emotional bunch with my financial security.

This obsession with short-term thinking, apparently, blinds people to the consequences of obvious phenomenon right in front of them...say, a decade or so of extremely low interest rates. 

I suffered through the last recession. I have complained at length about it, so I don't want to go on more about it here. I was also a conscious human being in 1987, 1990, and 2001, so I knew that another recession would come, no matter what the Treasury or Fed did to soften the impact. That is why I worked very hard to stabilize my financial circumstances. (I am not wagging my finger at anyone who wasn't able to do so; I appreciate that my family enjoyed some privileges that many others don't, and while my choices may have created some opportunities, it mostly amplified what advantages I already had.) That is also why I had a savings account and noticed that, while my accounts were modestly growing, they weren't growing as much as they might if, say, interest rates weren't consistently low.

What could possibly go wrong?

Let's agree that the world economy shouldn't pivot on my needs alone...but I somehow doubt that I was the only person in my position who had a little bit of money that I was trying to grow but didn't want to "risk". But that isn't what made the low rates so galling. They were, as far as I could see, the most durable measure that was taken after the 2008 financial crisis and ensuing recession, and they outlived their usefulness.

What was the point of low-interest rates? To make money more available to spend...but how? By encouraging people to borrow money. That money financed (or refinanced) mortgages, cars, educations, and businesses. Some of that might have been great -- but what about opportunities to build wealth that you didn't first have to borrow for? What about raising the minimum wage so it could be a livable wage, so that if a family had two wage- or salary-earners, they could save money? What about lowering the cost of education so that families didn't have to bet everyone's futures so one person could get a Bachelors degree? What about making it easier for people with high school diplomas or Associates degrees to get good paying jobs? What about subsidizing the cost of childcare so more parents who wanted to work could be a part of the workforce and generate more income? What about not making high end residential developments so easy to build -- with that cheap and easy money -- and driving up the cost of housing for everyone in the process?

Yeah, I guess keeping interest rates low was much easier than attacking those problems. A shame no one reminded people who worked with money for a living as well as the vast majority of our elected representatives about long-term consequences.

Here we are, and there's nothing we can do to change it except move forward. Here's hoping everyone remembers that nothing lasts forever and plans accordingly, especially those we trust to plan for us. (One last thing I'll say: cryptocurrency really shouldn't be your backup plan.)

Deb in the City