> Why does not printing money mean the poor will stop buying things? I imagine if their day to day expenses decrease relative to their nominal sticky wages, they'll buy more things, or at least save so they can buy in the future.

Let's take 2 different situations in the economy. Situation A, interest rates are going up (slowly). Situation B, they're going down (again, slowly).

What happens in this case ? Either you have debt, or you don't. If you have debt, your payments go up. Payments may go up more even when the principal of the debt goes down (quite common in mortgages). This means less money for everybody with a mortgage.

Let's say interest rates go down. Well, what happens now ? Payments go down regardless of principal being paid down going down or up (as long as the relative difference in the principal y/y is less than the interest rate differential, again with a mortgage this is not going to be hard).

So clearly, everybody with a mortgage will spend more
if interest rates are going down (regardless of what level they're at). Let's assume that these are responsible spenders/lenders.

Let's look at really irresponsible lenders. They will simply buy whatever their credit cards let them buy and then go bankrupt every few years. How much do they buy ? Well it's inversely related to the interest rate as well. It's the relative move of the interest rates.

Issue is, of course, panics. In order to get interest rates to go down, the government must make them lower than they are now. In the 80s, not a problem at all (started at double digits). 90s ? We're in the single digits now, but no biggie. 2000 ... whoops we need even more spending, let's lower them more quickly, and then in 2007 let's take them back up, because we can't leave them at zero can we ?

Now the issue is, spending goes up and down by the relative difference in the interest rates. When we're talking paying 10% vs 9.5% that's not so much and it can be tweaked. However, when we're changing them from 2% to 1.5% ... that makes a rather large difference. So when the FED took interest rates in 2007 from 1% to 5% ... that had a rather large effect, taking mortgage interest rates from, say, 4% to 9%, or a doubling (which would mean a 50% payment increase in the average half-paid-off mortgage). Then they took em effectively negative, and that's where they've been until the beginning of this year, with mortgages at 2-3%. They are still "sort-of" negative because the ECB and China's bank (and various smaller central banks) are still doing massive QE, and their banks are immediately turning around and lending that money out to Americans, depressing interest rates here as well. But they swear they're slowing down their lending (even if their balance sheets tell a different story ... so far). Interest rate normalization at this point would mean taking average mortgage rates from 2-3% to 8%, which would do more than increase an average payment by 50%. And mortgages have become ever larger ...

This is the effect of leverage, or debt. How much debt is there worldwide ? Well, every cent that exists anywhere has been lent out between 35 and 55 times (we don't have perfect stats). This means that there are between 30 and 50 owners for every dollar, or otherwise put, at least 97% of all money in circulation doesn't really exist, and is just a promise of someone to pay in the future. Given that there are many reasons (some good, some conspiracy theories) to assume the total amount of debt is underreported and very few reasons to assume it's overreported, this is likely to be a lower bound, with the real figure higher, maybe much higher.

What can go wrong is that the ability to pay back loans can become doubtful, and if that happens for ~3% of loans then the whole system goes boom. This is another way to look at what happened with Lehman in 2007.

But no worries ! Janet Yellen has said that there will be no more economic crises "in our lifetimes" [1]. How exactly she comes to that conclusion, given what leverage has wrought immediately before she came on is beyond me.

This leveraged reasoning even applies to the government itself, which should be thought of as a really bad lender in the above example (like a person never paying off a credit card). The government absolutely needs to either print money or have a constantly lowering interest rate.

To me it seems that one way you could make this system a whole lot more stable with low interest rates is to change the FED to no longer change interest rates by basis points, but only relatively. That they stop raising or lowering by 0.25% basis points, but rather that they increase or decrease the existing rate by 10%% (so 0.25% would become 0.275%). Seems to me that would make it a lot easier for the economy to adapt to their actions in low interest rate scenarios.

[1] https://www.cnbc.com/2017/06/27/yellen-banks-very-much-stron...