Comment by schmidtleonard
1 year ago
> Zero interest rate is like steroids.
The problem with your analogy is that paying interest is an active measure. It takes effort. The higher the rate*(outstanding debt), the more effort. This isn't a choice between injecting nothing vs injecting steroids, it's a choice between injecting sedatives vs injecting nothing. Raising the interest rate is like injecting a sedative. How much sedative should we inject? How much sedative can we inject?
I disagree, as this implies that an interest of zero is the normal default. Why would it be? Why would someone lend someone else money, when they get nothing for it?