Antifragile
Progress not perfection
FASTLANE INSIDER
EPIC CONTRIBUTOR
LEGACY MEMBER
Read Rat-Race Escape!
Read Fastlane!
- Joined
- Mar 15, 2018
- Messages
- 3,870
Rep Bank
$6,380
$6,380
User Power: 501%
@Zaratustra
Interest rate monetary policy increases the value of investments, causes purchasing on credit to become more lucrative, and lowers the carrying cost of existing debt burden. Interest rate policy also inflates asset values and puts money in the hands of the wealthy, focused on incentivizing spending.
Unfortunately, there are limits. One, as we approach near zero-rates it becomes less effective.
And two, the wealthy might not spend the money and instead save or invest, which drives up the value of investments such as real estate.
Quantitative easing (“QE”) monetary policy
QE policy is for central banks to buy bonds and other financial instruments, giving investors cash in return. The Bank of Canada was soinflarge-scale purchases of at least $5 billion per week of Government of Canada bonds.
When the interest rates approach zero, the interest rate monetary policy becomes less effective. QE policy has the same effect at later stages. At some point the price for assets is too high and returns are too low to motivate spending.
Other than interest rate and QE, Central Banks can do little to effectively motivate institutional buyers to spend.
That just leaves “Helicopter money” is the idea to put money in the hands of those who need it most and will spend it.
Hope this helps you understand “why would anyone borrow”. It’s not as simple as you made it seem.
Interest rate monetary policy increases the value of investments, causes purchasing on credit to become more lucrative, and lowers the carrying cost of existing debt burden. Interest rate policy also inflates asset values and puts money in the hands of the wealthy, focused on incentivizing spending.
Unfortunately, there are limits. One, as we approach near zero-rates it becomes less effective.
And two, the wealthy might not spend the money and instead save or invest, which drives up the value of investments such as real estate.
Quantitative easing (“QE”) monetary policy
QE policy is for central banks to buy bonds and other financial instruments, giving investors cash in return. The Bank of Canada was soinflarge-scale purchases of at least $5 billion per week of Government of Canada bonds.
When the interest rates approach zero, the interest rate monetary policy becomes less effective. QE policy has the same effect at later stages. At some point the price for assets is too high and returns are too low to motivate spending.
Other than interest rate and QE, Central Banks can do little to effectively motivate institutional buyers to spend.
That just leaves “Helicopter money” is the idea to put money in the hands of those who need it most and will spend it.
Hope this helps you understand “why would anyone borrow”. It’s not as simple as you made it seem.
Dislike ads? Become a Fastlane member:
Subscribe today and surround yourself with winners and millionaire mentors, not those broke friends who only want to drink beer and play video games. :-)
Membership Required: Upgrade to Expose Nearly 1,000,000 Posts
Ready to Unleash the Millionaire Entrepreneur in You?
Become a member of the Fastlane Forum, the private community founded by best-selling author and multi-millionaire entrepreneur MJ DeMarco. Since 2007, MJ DeMarco has poured his heart and soul into the Fastlane Forum, helping entrepreneurs reclaim their time, win their financial freedom, and live their best life.
With more than 39,000 posts packed with insights, strategies, and advice, you’re not just a member—you’re stepping into MJ’s inner-circle, a place where you’ll never be left alone.
Become a member and gain immediate access to...
- Active Community: Ever join a community only to find it DEAD? Not at Fastlane! As you can see from our home page, life-changing content is posted dozens of times daily.
- Exclusive Insights: Direct access to MJ DeMarco’s daily contributions and wisdom.
- Powerful Networking Opportunities: Connect with a diverse group of successful entrepreneurs who can offer mentorship, collaboration, and opportunities.
- Proven Strategies: Learn from the best in the business, with actionable advice and strategies that can accelerate your success.
"You are the average of the five people you surround yourself with the most..."
Who are you surrounding yourself with? Surround yourself with millionaire success. Join Fastlane today!
Join Today
