Dynamite Economy 3.10 Importance of Human Motivation

Solvere, Cognose LIM Swee Keng (Sep 22, 2008)
http://www.cts-ideas.com/ tab Cognose.blogspot.com
Dynamite Economy 3 - Deadly Urgency
3.10 Importance of Human Motivation

Late 90s, Economists discussed about the situation when interest rate zero bound[1],[2]. They cannot imagine interest rate can go negative, because they understood very well number, busy with building models, they do not respect the nature of human.

In fact, as early as 1970s, holding Swiss Franc was an attractive option. Foreigners were given negative interest rate to hold this privileged currency.

January 24, 2003, Friday, normal Japanese domestic interest rates went negative. Banks lent money on that night and accepted back a smaller amount on Monday morning. Banks have too much money from the mighty works of Morita-Matsushita generation. Cheap money overshadowed the reality – dearth of real wealth creating engines for investing, economy definitely stagnated, Japan lost her eminence, economy remain at the valley for almost a decade now.

If we understand nature of human, these are not only reasonable acts, these acts indeed are predictable, from the basic instincts of investors’ unpretentious positioning to reduce losses, to multiply profits.

If we look at only number, without satisfying human's nature of profit seeking, without invigorating the economy, how can present severe, complex problems be addressed correctly, even partially?
Will not partial anesthesia impair progressive movement?
Will not cosmetic surgery weaken the patients?
Will not incorrect solutions bring more harm?

To avoid the worse than WWII from unfolding

we need to solve this deadly urgent problem!

To solve this complex, deadly urgent problem with certainty, effectiveness, efficiency,
We need to satisfy the nature of human, even seemingly insatiable!

[1] “Three Lessons for Monetary Policy in a Low Inflation Era” September 1999, David Reifschneider and John C. Williams, Board of Governors of the Federal Reserve System, Washington, DC 20551, david.l.reifschneider@frb.gov jwilliams@frb.gov
[2] “Price Stability and Monetary Policy Eectiveness when Nominal Interest Rates are Bounded at Zero” June 1998, Athanasios Orphanides and Volker Wieland, Board of Governors of the Federal Reserve System.