By Matthew Kerkhoff
Cheap money is supposed to spur businesses and consumers to spend and invest. That’s the whole point of lower interest rates. As that money flows through the economy, it creates jobs, innovation, and it (theoretically at least) drives inflation higher.
Inflation can then act as its own feedback loop, simultaneously eroding the drag of previous debts while also incentivizing additional spending, since prices are expected to be higher in the future.
That all sounds fine, but we’ve seen a distinct weakness in business investment lately, even with near-zero interest rates, and it prompts the question why.