Watching, It Bears

"It's all about stuff." -- George Carlin

   The bad news bears watching as rate reductions ripple around the world and head toward the U.S.  Meanwhile, Sweden's central bank has cut its key lending rate even further below zero, following the Bank of Japan's reduction to just below zero.
   Why do this? Academics will say it encourages investment, which improves the economy by making more money available for people to use.
   More simply put, it tells people not to save money but to spend it. After all, an economic slowdown -- a recession -- happens when people stop buying stuff. This tells retailers not to stock their shelves, and prompts manufacturers to stop making stuff since people are not buying.
   So around and down it goes, until someone decides to stop saving for a rainy day, since that rainy day is here.
   The bottom line, therefore, is that a negative interest rate means you're paying a bank to hold your money for you. That makes even less sense when you remember that inflation -- rising prices -- hits your purse a second time.
   Of course, a negative interest rate doesn't affect the average household, but it does mean savings accounts bring a minimal interest.  As well stuff your money in a mattress.
   But such action by central banks are meant to affect the total movement of money on a national scale. And the faster money moves, the better off the economy.
   So that's the plan. When an economy slows, central banks lower interest rates to encourage spending, starting with new investment to increase production, which makes more stuff, which means a larger supply and lower prices, which means people buy more stuff because it's less expensive. And a higher demand entices manufacturers to make even more stuff, and the growth cycle continues.
   In theory, that's what should happen. In reality, it doesn't always happen that way. But it does happen often enough to continue that strategy. Even so, it doesn't happen as quickly as the central bank experts hope.
   And, of course, not all the experts and financial gurus believe in that theory. In general, liberals do but conservatives do not.
   So what happens when liberals at some central banks lower interest rates as they follow that strategy? Japan and Sweden already have and England and the European Union central bank may follow. But the U.S. Federal Reserve, in the world's largest economy, instead raises interest rates?
   Can you say conflict?
   Watching, it bears, as Yoda might say.