Category: Credit, Fixed Income/Interest Rates, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

3 Responses to “The Insensitivity of Investment to Interest Rates: Evidence from a survey of CFOs”

  1. Wade says:

    I’m not an economist, but I have started several companies, and participated in many more companies which were trying to grow themselves (some successfully, some not), and at no time did I ever see that interest rates determined whether or not we would put money into a venture. The only two questions that mattered were, whether we thought there was sufficient market demand to generate a worthwhile return, and whether we would have a clear market advantage (and how long that advantage was likely to last).
    The study’s authors clearly expect that higher interest rates would lead to lower investment. If anything, I think the reverse might be true. Back in ’82, with interest rates approaching 18%, we had to innovate like crazy to give our customers a reason to borrow to buy our products. Now, companies have discovered that rent-seeking is an easier and more certain path to profits, and so investment in innovation seems to have generally fallen by the wayside. Congressmen and Senators are much more affordable than R&D departments. Or so it seems, right up to the time when the Huns are at the gates.
    Still, my experience is just one data point, and probably not a typical one, and it is interesting to see even a limited study done on the effects of interest rates on investment.

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