Long Term Interest Rates

Today’s Washington Post editorial page argues that congress should spend less time worrying about the problems of unemployed people and more time worrying about projections of future deficits. They link back to an argument they made earlier this month that companies aren’t investing because of “looming American indebtedness and the effect that could have on long-term interest rates.”

But like the hypothesis that Germany is facing a sovereign debt crisis this can be quickly refuted by looking at the actual interest rates:

Economagic: Economic Chart Dispenser

We can also see, though on a shorter time series, that long-term inflation expectations have never been lower. Businesses aren’t failing to invest because of long-term interest rates. Rather, businesses aren’t investing for the same reason that rates are low—expectations of growth are incredibly low.