I’m not an economist, but I do know a few things about economics, I think. Anyone that specializes in business principles knows something about economics, particularly micro-economics. I was on a family picnic yesterday, and while being lazy in the park, I was thinking about the negative interest rates now seen in some places. For example, you can get a long-term mortgage in Europe that has you paying back less money than you borrowed. How is that possible? Probably because the supply of lendable cash exceeds the demand for it. With year after year of almost runaway quantitative easing, econo-speak for creating money, there is a surplus of money around.
Initially, the new money wasn’t going anywhere. It was parked and not lent, but more and more of it has found its way into consumer and business loans, with the result that interest rates have declined.
There is potentially another result too. Lending that money puts the money into hands that will spend it. The effect should be an increase in the velocity of money, with resulting increases in prices, unless production of desired goods and services grows more quickly, something that is unlikely to happen.
There are economists and politicians that regard humans mainly as consumers --- mouths to feed. They miss the fact that humans create wealth. Adding to a population of people should increase the wealth available to that population, unless the additions are uneducated, dull of thinking and lazy, not the norm with most people. Nonetheless, the increase in wealth that can be occasioned by a growing population cannot keep up with the rate of increase in money available to that population when money is multiplying geometrically and is being circulated.
We could easily see a major divergence between price inflation and interest rates, contrary to the old wisdom that interest rates parallel inflation rates.
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