And the interest rate is the price of that metric – of money itself. When the price is zero, it makes no difference whether money is kept under a mattress or lent, because there is no cost to holding or borrowing cash.



Please excuse me, but this statement represents just about what is entirely wrong with economics. I was a biology major, spent time in a lab, got an Md degree, and worked in labs during. Upon taking some into MBA economics courses I cane across statements such as this. found them to be confusing and did a small survey of actual people on how they would behave. They would save more knowing they would have less in the future and felt they needed a larger reserve. there's a drop in total income. So I decided like any real scietist to try and find real empirical data regarding actual human spending. I couldn't find any, despite and exhaustive search. In fact I found suggestions to the opposite of accepted theory. Since that time (2009) a good amount of empirical evidence has some out against predicted spending and economic theory. Yet you repeat it as truth. Yeah it was proven true via math assuming homo economics, that isn't proof.



When is your discipline going to wake up to the major problem. You have a methodology problem.



Here's just one link, and I could fill up a page showing the real world doesn't work like your theories



Household Inflation Expectations and

Consumer Spending: Evidence from Panel Data

These findings are surprising because theory

predicts that consumption of durable goods should be more sensitive to real interest rates than

consumption of nondurable goods. In addition, consumers in our sample, on average, did not

expect their nominal income growth to match inflation, and therefore an increase in expected

inflation would create a negative income effect that discourages spending in both the present

and the future. The findings suggest that, as a policy measure, raising inflation expectations

may not be effective in boosting present consumption

http://www.bostonfed.org/economic/wp/wp2013/wp1325.pdf



from the boston fed



several studies

Economists Mystified that Negative Interest Rates Aren’t Leading Consumers to Run Out and Spend

http://www.nakedcapitalism.com/2016/08/economists-mystified-that-negative-interest-rates-arent-leading-consumers-to-run-out-and-spend.html



there honestly are more than just this. Look I like the author, supported his political party, but I get infuriated when economists say something is true where the data is bad and often the opposite of what theory states



here's another



http://www.nytimes.com/2015/10/20/upshot/when-gas-becomes-cheaper-americans-buy-more-expensive-gas.html?_r=0



If I recall the bis has debunked your statement more than a few times.



In my honest opinion, as someone who likes the author and doesn't think he knows he's saying something that is dubious at best as a fact, this is the single biggest problem in economic. What is truth in economics may have no relation to the real world. YOU NEED EMPIRICAL VER$RATIFICATION. Note, this was why I was laughing out loud, to the dismay of my econ professor. Some truths in economics must in fact be false in the real world. homo economics, I laughed when I was told about the assumptions required in black scholls. People win nobles in economics for "crap"



fix your profession, that's the fist thing needed in economics