Season 1 · Episode 382
Should we fix central bank interest rates?
If central banks didn't move interest rates, and just kept them fixed, would we lose the fight against inflation.
Debunking Economics - the podcast · Steve Keen & Phil Dobbie
December 20, 202342m 26s
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Show Notes
Central banks assume there is a natural rate of interest – a point of equilibrium at which the demand for loans matches the supply of loans. They believe if interest rates have been too low, they risk over-heating the economy, risking inflation. But does it work? Steve suggests that interest rates should be fixed, with control of the economy managed through government fiscal policy. But Phil asks, won’t interest rates always move? If somebody wanted to borrow money off you, and you knew there was few other places they could get a loan from, surely you’ll charge them more. Or if you fear inflation will rise, won’t you want to charge higher interest to compensate for the effective reduction in the money returned to you at the end of the loan?
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