The Right Coast

Editor: Thomas A. Smith
University of San Diego
School of Law

Thursday, August 22, 2019

The Disaster of Negative Interest Policy | Mises Wire

If anyone can suddenly get a loan with a negative interest rate, then it is to be expected that the credit demand will get out of hand. To prevent this from happening, the ECB will have to resort to credit rationing: It determines in advance how many new loans it wishes to hand out, and then allocates this amount of credit. The credit market no longer decides who gets what and when and on what terms and conditions; those decisions are made by the ECB.

According to which criteria should loans be allocated? Should anyone who asks for credit get something? Should employment-intensive economic sectors be favored? Should the new loans only go to ‘the industries of the future’? Should weakening industries be supported with additional credit? Or should Southern Europe get more than Northern Europe? These questions already indicate that the planned economy is established through a policy of negative interest rates.

via mises.org

https://rightcoast.typepad.com/rightcoast/2019/08/the-disaster-of-negative-interest-policy-mises-wire.html

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