Low Interest rates

As we can all see, the U.S banks interest rate are still at an all time low because of the following key reason


It is needed to help boost the number of jobs due to the recent 10.2% of unemployment


So how does a low interest rate actually helps to boost job? The typical answer to this question is that with a lower interest rate, small businesses can borrow more in this adverse financial economy and thus they have the money to expand their operations and eventually hire more people.


Contrary to popular belief, that does not seem to be the case at all. Ever since March 2009, the Fed has already forced the interest rates down all the way to a record 0%. But what actually happens to the unemployment rate in the United States? It is climbing higher and higher day by day, month by month to the 10.2% now.

So the perplexing question here is, does low interest rates effectively aid in the creation of jobs?


Personally, I'm pretty ambivalent about it. For one, I feel that the small businesses can no doubt borrow more since the odds are not against them. However, the small businesses are not helping to assuage the problem of unemployment at all. The big businesses on the other hand are cutting more jobs, even giant corporate companies are no exceptions.


With that in mind, who is actually taking in people? The answer is no one. The healthcare industry has already reached a saturated level and the education sector has all the people they need, the corporate industries are slashing jobs. So the net effect is higher unemployment.


The plausible solution here is for the government to step in when it comes to job creations. By giving the small businesses the choice to choose whether they want to hire is not feasible at all. Any businesses in the right mind will not risk hiring more people when they themselves are skeptical about the outlook of their businesses. If I were them, I will borrow as much as I can due to the low interest rates but I will wait till the economy recovers completely before I start to hire. Even though it might be an arudous journey ahead to work on low manpower, I believe I will pull through!



Credits -marketwatch, -biojobblog