The confusion of mainstream interest stabilization and debt sustainibility

The mainstream narrative, behind interest rates, is that lower rates increase lending, and thus drive inflation. Meanwhile, higher rates reduce lending.

But who is lending to who, and for what, actually matters. So you can’t make a blanket generalization, about these effects. The biggest effect of lending practices on inflation, is how collateral is priced. If the bank is willing to lend you $400,000 for a home, that is only really worth $200,000, then that will drive those prices up. So for prices, collateral matters and not rates.

Interest rates across the economy do not have to be uniform, because every form of wealth, exists “semi-independently”. If you have an antique vase worth $5,000, and then you drop it, then that value is lost. If the economy goes to crap, there may be fewer antique collectors, and so the price will drop. These represent two very different events. One is how much it is valued, and one is the state it is in.

Borrowing is not limited by investment funds, because borrowing is done with money, and money is just a record. All forms of money are records. There is private credit, bank money, etc. The process of “money creation” is a process of documenting, assessing, and bookkeeping collateral. “Modern money” can be backed by anything, or invested into anything or nothing. Imagine you had a gold standard, and then you also started buying and selling silver, and wheat, and then houses, and then… at a certain point…