It has been argued that fear of sudden cessations and reversals on account of portfolio flows are highly exaggerated. I am inclined to agree with this observation on two grounds. First, experience shows that though the aggregate portfolio investment at any point of time may have a volatile periphery, it does have a significant stable kernel.
More specifically, compared with the rates of return which can be earned under normal conditions, the low interest rate would be disadvantageous for savers and lenders, and relatively more favourable for borrowers, also in this ideal economy.