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Quotation of the Day…

… is from pages 37 of Lionel Robbins‘s 1934 volume, The Great Depression; here Robbins describes some of the economic consequences of interest rates made artificially low by too-easy monetary policy:

The new money will flow to those parts of the economic system most affected by the rate of interest.  There will be an increased demand for what we have called capital-goods.  There will be a boom in the construction industries and in the industries producing raw materials.  Producers in these industries, on the strength of the new demands, will be able to bid away from other industries factors of production common to both.  The new labour supply will go into these industries rather than elsewhere.  Raw materials, such as coal, pig iron, and timber, will tend to be used in greater proportions in these parts of the economic system.  The production of “producers’ goods” and durable consumption goods, such as houses, will increase.

See this related 2008 paper by my colleague Larry White.