To be sure, low interest rates are no panacea, especially if they are essentially a reflection of economic weakness. A prime example is Japan, where yields on 10-year government bonds fell below 1.9 percent earlier this month, rivaling the lowest levels reached during the Depression in the United States. Still, most economists expect cheap money will have a positive effect on industrial countries, particularly the United States, where the economy is strong, and rate changes feed through quickly to consumers and companies. The government reported Thursday that housing starts totaled 1.476 million in 1997, the second-best level in a decade. Ford Motor Co. is predicting sales of new cars and light trucks will top 15 million for an unprecedented fifth year in a row in 1998.
Inflation is low and less variable.
Planning is easier, and you can plan further out. Companies are certainly moving to capitalize on low rates to raise cheap money. In Germany, the housing market remains sluggish because of a huge building boom in the early 1990s. With mortgage rates at a postwar low of 6 percent, Deutsche Bank AG predicts housing investment will rise only 1.4 percent in Western Germany this year. Consumer and business confidence also suffer from high taxes and heavy labor-market regulations.