Fixed mortgages, with interest rates at 6%, were replacedwith variable-rate mortgages, whose interest payments were tied tothe lower short-term T-bill rates.

So, while bringing down short-term T-bill rates to nearzero has failed, the hope is that bringing down longer-terminterest rates will spur the economy.

Since WWII, the US unemployment rate has averaged 8% whenthe short-term nominal T-bill rate is 2% or lower.

An FAO paper notes that “term finance [for agriculture] is not an attractive activity for rural finance institutions, especially if other less risky investment options like short-term loans or treasury bills are available.

Initially, these countries invested their foreign reservesin liquid assets – short-term United States Treasury bills andgovernment securities issued by other reserve currency countries. Then they realized that their holdings in liquid and low-returnassets far exceed what is needed to avoid the type of speculativeruns that East Asia experienced in 1997, and Russia in1998.