There is a 3rd option.

I don't know what I'd do with an extra $100. Maybe a nice dinner that feels about the same as any other nice dinner I can have whenever I want?

But an extra few hundred thousand, now we're talking. I could buy a home instead of rent and save money in the long run. Or travel for a while. Plenty of things you can do with an extra few hundred thousand.

As it stands today. I have more money than I need for ongoing lifestyle stuff, but not enough for long term improvements. Hence I buy avocado toast instead of a house.

You can always start saving a little. Maybe a home is out of your grasp but traveling for while is definitely achievable.

Of course. My point is that there is a whole class of people, let's call them "college educated millenials" or somesuch, for whom an extra $100 doesn't mean much, but who have plenty of things they could gold plate and put diamonds on.

The dichotomy that there are only the ultra wealthy and the almost destitude is false. There's a lot of inbetween.

The end game is collapse. To be more specific, a return to less intensive, lower overhead, and more efficient ways to support our needs. Like, currently, Americans worried about not getting taken care of in their old age do something like "create advertisements that convince people to spend their money differently for forty years, siphon off 5-10% of that, invest it in a complex hierarchy of financial instruments that nets out into debt of some sort, and finally cash those promises of real goods and services into actual healthcare/housing/living expenses".

5 generations or so ago, the plan was something like "have a bunch of children and set them up for success as best you can."

Anyhow, there's a lot of safety factor in terms of optional rent-seeking behavior. Hospital prices and care levels can be dropped from "optimized to loot savings of middle-aged families" to something more in line with the real costs of having X doctors per hundred thousand citizens. We can let the McMansions rot. We can stop squandering our resources on stuff that really doesn't matter.

Or you could fund a universal public healthcare system like the rest of the developed world.

>What does the end-game look like? When interest rates are perpetually zero and you simply can't squeeze another single dollar out of the masses?

Pet peeve: Low interest rates somehow hurting the huddled masses. Low interest rates benefit those with loans and hurts those with capital. Poor people are massively more likely to benefit from low interest rates than to be hurt by it.

Not quite. If you had income generating assets before rates were reduced, you benefited greatly.

And credit can still be tight when rates are zero (or negative). Low rates as they stand hurt those that are trying to save.

Artificially increasing interest rates is going to show up in inflation, because no new wealth is being generated. It becomes a wash. No one's wealth is increased.

Depending on what you mean by "show up in inflation", it sounds like you have cause and effect backwards? The Fed increases interest rates to act as a brake on the economy (less investment) when they think they need to reduce inflation.

>Poor people are massively more likely to benefit from low interest rates than to be hurt by it.

We're talking about homes here right? Take a look at major cities across the country, poor people aren't buying homes — developers are, and they're renting them to the poor.

The type of interest the poor are paying is on credit cards, cars, and payday loans. The poor often don't even have bank accounts.

Depends who you're talking about here. The poor aren't even those below the poverty line in this comparison - it's those who consider themselves middle-class (but are slipping out of it more and more each year).

> Poor people are massively more likely to benefit from low interest rates than to be hurt by it.

There seems to be a correlation between low growth and low interest rates.

It's interesting to speculate that the direction of causation might be low interest rates -> inefficient use of capital -> low growth. In which case low interest rates would hurt everyone.

I share his pet peev. Economics has studied this extensively and the evidence suggests otherwise. And it is more complicated than you suggest.

What is your model?

During the 90s low interest rates were not associated with low growth. Your model doesn't explain that.

You haven't established a causation here at all. How does it work? Why? What? It also completely ignores nominal vs. real interest rates.

Poor is a state of having low capital. Low interest rates make it hard for poor people to save their way out of being poor. Making it harder to accumulate capital keeps the poor being poor. That's why it's so expensive to buy stocks and housing at the moment. There's less ways for poor people to become less poor.

There are lots of options to buy stocks without big fees, in small dollar amounts.

Lack of good investment options really has little to do with poverty. Complex causes, complex remedies.

But those stocks pay low dividends due to low rates. They are expensive stocks. High capital people can access the near zero rates to invest, the poor only have access to credit cards. At high interest rates it is expensive for both the rich and poor to invest. In low rate environment low capital people are at a disadvantage.

How would higher interest rates change things? They're higher for everyone across the board. I suggest looking up nominal vs. real interest rates.

That's like saying government price caps does not make it easier for people to buy goods. While true, price controls absolutely do have actual affects on economy. Typically supply is reduced from equilibrium and the economy is damaged; in paying low prices people have to wait on long lines. Except for cronies who have political capital to get all the goods they want at a low price. 'Nominal price' is different to 'real price'

The same goes for interest rates. A cap on interest rates does not make it easier for the poor to buy homes and cars; in paying low interest rates people have to pay for much higher prices for homes.

By giving up control of nominal interest rate, it would return to equilibrium and reduce capital inequality.

Low interest rates inflate real estate prices and rents. This is murdering the lower and middle class, especially those who do not yet own a home or who had to take out some kind of ridiculous suicide loan to squeeze into one.

I know people paying >50% of their income on an over-inflated mortgage for a starter home.

There isn't a clear one-to-one relation here. The causes for inflation in real estate prices and rents are not as simple as "the fed keeps rates too low".

An increase in the price of rent should lead to an increase in construction, which leads to an increase in real estate value.

The return on investment is there to be made, and the obstacle isn't low interest rates.

Low interest rates also inflate stocks. When you can't earn much with cash sitting in the bank you switch to something with more return.

And last I checked the average Joe doesn't have enough savings to put into stocks.