Abstract
Now midway into the 1980s, the theories concerning the formation of short and long term interest rates have been badly belied by reality. Can it not be said that the impact of positive real interest rates on the pace of economic activity has turned out to be one of the most disconcerting snags in neoclassical and Keynesian theory? Wasn’t the Keynesian belief in their destructive effects on growth so strong that it was still widely held just a few months ago that economic recovery was impossible in a western world beset by excessive positive real interest rates? Has the American upswing and its expansion to Europe really calmed all fears in this respect?
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