[printergirl]

lowering interest rates should be used to get out of a recession
but nations dont want weak currency as this will scare foreign investors?

just need more details about this

[printergirl]

(Original post by the.cookie.monster)
Interest rates ARE low they are at a historically low level already...
it hasn't helped significantly as consumers low confidence overrides this
no actually a weak currency is not all bad, a depreciation will help the competitiveness of UK exports but it depends if firms are flexible enough to take advantage of this.

In general,not exclusively talking about uk now
I'm readin about recessions in particular 2007 and it said some countrys were afraid of lowering interest rates as they were scared of the market buyers (something like that) didn't really understand what it meant

[printergirl]

(Original post by the.cookie.monster)
Which country/countries did they refer to?

Don't remember it mentionin particular names, said something hoe ita not just developing countrys but strong one too who are dont want to scare markets

[MagicNMedicine]

Markets aren't 'scared' by a weak currency. Markets get 'scared' when they don't want to invest in a country's assets because they think they will get a low or negative return, if they think the economy is going to do badly they may fear buying shares in companies, or if they think the government will default they may fear buying government bonds. But a weak currency is often going to benefit the economy through exports so they won't get put off by that.

However lower interest rates will mean the returns for lending in that country are lower so investors are more likely to put their money in other countries which means you will get some capital flight out of the country and that will weaken the currency as it strengthens the supply and weakens the demand for pounds when all the investors leaving the country change their pounds for other currencies in the places they want to invest.

Lowering interest rates can help get out of a recession sometimes because lower interest rates encourage more business investment and also more consumer spending, which boosts GDP, but it won't make a difference once nominal interest rates are already at the floor like they are now, if you are still in a recession at that point then interest rate cuts are not a solution.

[printergirl]

Markets aren't 'scared' by a weak currency. Markets get 'scared' when they don't want to invest in a country's assets because they think they will get a low or negative return, if they think the economy is going to do badly they may fear buying shares in companies, or if they think the government will default they may fear buying government bonds. But a weak currency is often going to benefit the economy through exports so they won't get put off by that.<br />
<br />
However lower interest rates will mean the returns for lending in that country are lower so investors are more likely to put their money in other countries which means you will get some capital flight out of the country and that will weaken the currency as it strengthens the supply and weakens the demand for pounds when all the investors leaving the country change their pounds for other currencies in the places they want to invest.<br />
<br />
Lowering interest rates can help get out of a recession sometimes because lower interest rates encourage more business investment and also more consumer spending, which boosts GDP, but it won't make a difference once nominal interest rates are already at the floor like they are now, if you are still in a recession at that point then interest rate cuts are not a solution.

Thanks
Do you know any goodd easy to read articles about tthing's like that

[Speckle]

To add to previous posts: liquidity trap.

[printergirl]

(Original post by Speckle)
To add to previous posts: liquidity trap.

Explain?

[MagicNMedicine]

When you're in a situation like we are now, when interest rates are already rock bottom, then you can't have any more expansionary effect through monetary policy because you can't make nominal interest rates go negative, so you won't have any more stimulus on investment by making borrowing cheaper. If you increase the money supply further all that will happen is people will just hold on to the extra money.