Excessively fluctuating interest rates

(Ref. 318)
Problem Components
Policy issue area: Economics
Policy issue: Monetary system
Description: Significant interest rate changes interfere with proper functioning of the economy.
Symptoms: With high interest rates domestic business investments are becoming too costly; investments and jobs are exported to foreign countries; housing is becoming too costly to first-time buyers; difficulties of financing budget deficits.
Causes: Lenders' expectations that future budget deficits will trigger inflation; Federal Reserve Bank's policies.
Cost of problem: -
Solution Components
Resources: Universities and research institutes; Federal government (Congress and regulatory agencies); financial institutions.
Goal: Reduce real interest rates to an acceptable, reasonably steady level (not more than 2% over inflation rate).
Program area: Financial resources development
Program-remedy: 1. Cut the Federal budget deficit
2. Require the Federal Reserve Board to follow policies that lead to reasonably low interest rates.
Program-prevent: National policy of balanced economic development and matching monetary policies.
Cost of program: -
Beneficiaries: All who need to borrow money.

Return to Exhibit H

Return to Contents