Governments are pretty much brain-dead in their vain attempts to manipulate the economy. They think that lowering interest rates will “stimulate” the economy and cause people to borrow. That has never worked because people respond to the trend and function in anticipation. The root driving force is rather straight forward. Why is there an inflationary bubble? People anticipate that prices will continue to rise so they buy now for it will only be more expensive tomorrow. Japan saw a surge in retail sales the month before the consumption tax rate increase. People are not as stupid as government suspects.
In reverse, constantly lowering interest rates is feeding the deflation. It not merely reduces income for the elderly making savings pointless, but it has been reflected in the decline in retail sales. Why buy today when tomorrow will be cheaper?
Reuters has reported: “Special Report: Why Italy’s stay-home shoppers terrify the euro zone” What is fascinating is that we can read reports like this, yet both the academic community and the political community will not change their theories. Reuters quoted:
“People aren’t stocking up because they know prices will be lower in a month’s time,” says Santambrogio, chief executive of Vege, a Milan-based association covering 1,500 supermarkets and specialist stores. “Shoppers are demanding steeper and steeper discounts.”
It is really hard to comprehend that in this pretend science called economics, we never investigate HOW something functions, but how to manipulate the economy to compel it by force to do as we desire. Any people think our analysis investigating how things function is somehow off the beaten-path.
