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This is something that has been keeping me wondering for years. Since the financial crisis the European Central Bank has basically fixed base rate at negative (
by fcsp 5y ago
This is something that has been keeping me wondering for years. Since the financial crisis the European Central Bank has basically fixed base rate at negative (since 2012), leaving the market flooded with desperate investment money (due to all old school investment options becoming a negative) Now also of course since it's "cheap" the real estate prices have almost doubled in that timespan, having previously hovered around the same mark for the ten years before that.
What I wonder is - is there any way out of this curse of growth with all the money spent into those inflated prices at this point that does not mean complete economic collapse?
- moonchrome 5y agoJapan like stagflation ?
- lottin 5y agoIn theory, a fall in nominal interest rates below the real rate of return of capital should spur investment, since entrepreneurs can borrow funds at a low rate to expand production capacity or start new businesses and obtain a higher rate of return. The reality is we don't see much investment going on, and at some point the ECB will have to face up to the fact that the low interest policy doesn't work.
- imtringued 5y agoThe reality is that people invest abroad. After all, there is no rule that they must invest in their own country. > at some point the ECB will have to face up to the fact that the low interest policy doesn't work. And repeal the zero lower bound or what? Face up to what? Interest rates will be low as long as supply of labor outstrips demand for labor.
- snidane 5y agoLow ingerest rate resulting in economical growth is a dogma recognized across economic schools, which fails to materialize empirically. Look up Richard Werner on this. The only growth that is observed is businesses which are serving the bubble. Eg. construction industry having a boom as well as cryptocurrency startups.