Businessweek Archives  What It Will Take To Jump Start The
Economy  Readers Report   Kuttner's article, "Why the economy
isn't heeding Clinton's call" (Economic Viewpoint, July 26),
arguing for an investment stimulus, necessitates comment. First,
the Clinton plan to stimulate the economy through deficit
reduction or lower interest rates is by itself erroneous, in
that lower rates are in themselves a reflection of lower demand.
It is no different than saying lower apple demand will reduce
the price of apples. However, the lower price will not increase
the consumption of apples.  Kuttner errs when he states real
interest rates during the Great Depression were zero. From 1929
to 1933, the consumer price index fell by about 25%, about the
same drop as the M1 money supply. The real rate of interest rose
markedly, as borrowers were forced to repay with more expensive
dollars. This, coupled with negative expectations concerning
profitability, significantly inhibited investment.  Herbert M.
Bernstein   Robert Kuttner