US interest rates – how low can you go

Well not much lower.  US interest rates were cut from 1.5% to 1.0% today.  Soon they’ll be emulating Japan’s interest rate environment – hovering around 0.5%.  And Japan’s economic reputation for the past decade or so has not been good.

As we’ve said before, the interest rate level is not the problem.  This reduction may act as a signal, but it will only be short term and will not reinvigorate confidence in a system which has proven to be untrustworthy.  Moral hazard must be addressed.