Frank Shostak, one of my favorite modern Austrian Economists, outlines why capitalists are fooled by the lowering of interest rates.
The business cycle last many years. So even if business men feel that the economy is weak and the government is attempting to coax them to invest by lowering interest rates, eventually, they will have to invest or go out of business.
Interest rates must rise significantly in the future to extinguish the mal-investment that exists throughout the world. It will be painful, but necessary. From the article:
A businessman has only two options — either to be in a particular business or not to be there at all. Once he has decided to be in a given business this means that the businessman is likely to cater for changes in the demand for goods and services in this particular business irrespective of the underlying causes behind changes in demand.
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