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…

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store