The Real Story of Interest is niet zomaar een geschiedenis van rente (en denken over rente) maar is daarnaast ook een uitstekende verklaring voor de grote financiële en economische problemen waar we ons momenteel in bevinden. Het verklaart de huidige inflatie, de magere economische groei van de laatste decennia (in de Westerse wereld), de stagnatie van het reële inkomen en de toenemende economische ongelijkheid. Het is dan ook een bijzonder interessant boek.

• De negatieve gevolgen van lage/negatieve rentevoeten (Proudhon had ongelijk, Bastiat had gelijk - vooral de arbeidersklasse verliest bij lage rentevoeten, de banken en rijken floreren):
  After the Lehman Brothers bankruptcy in September 2008, neoliberal economists implemented the anarchist Proudhon’s revolutionary scheme (so much for neoliberalism, TFB). Central bankers pushed interest rates to their lowest level in five millennia. In Europe and Japan, rates turned negative – an unprecedented development. The results were not as Proudhon anticipated, however. Rather, Bastiat’s grim forebodings about free credit appear closer to the truth. Central bankers congratulated themselves for restoring calm on Wall Street. The bogey of deflation was dismissed. Unemployment came down sharply. These were the ‘seen’ effects of zero interest rates. The secondary consequences of zero interest rates went largely unseen. Yet they were there for anybody who cared to look. In 2012, the Canadian economist William White published a short paper entitled ‘Ultra Easy Monetary Policy and the Law of Unintended Consequences’.23 White suggested that the sharp decline in interest rates had encouraged households to spend more and save less. The downside of bringing forward consumption from the future, White suggested, was that people must in fact save more for any predetermined goal; and, given the prevailing low interest rates, it would take much longer to accumulate a satisfactory nest egg. The authorities believed that low rates would boost corporate investment. But White suggested firms were actually investing less. Furthermore, ultra-easy money was responsible for the misallocation of capital. Creative destruction was thwarted. ‘It is possible,’ White concluded, ‘that easy money conditions actually impede, rather than encourage, the reallocation of capital from less to more productive resources.’ By lowering the cost of borrowing, ultra-easy money provided an incentive for investors to take undue risks. At the same time, insurance companies and pension providers were struggling to cope with the low interest-rate regime. Given the low cost of borrowing, governments were unconstrained to run up their national debts. In the last analysis, easy money served only to postpone the day of reckoning. ‘Aggressive monetary easing in economic downturns is not a “free lunch”,’ concluded White, ‘at best, it buys time to rebalance economies. In reality, this opportunity is wasted.’ On Wall Street, they talked about ‘kicking the can’. White also suggested that monetary policymakers might face trouble exiting from their ultra-low rates. A few years after White’s 2012 paper, the Fed embarked on a tentative tightening cycle but soon abandoned its attempt to take interest rates back to normal levels. Instead, the Fed returned to printing money and cutting rates, and after Covid-19 struck the policy rate went back down to zero. White anticipated that central banks would also be forced to play a greater role in the provision of credit. This too has come to pass. During the pandemic year of 2020, central banks moved closer to directly financing government spending, as White predicted (see Postscript: The World Turned Upside Down). Bastiat’s claim that free credit would be a disaster for working people was not far off. After the subprime mortgage crisis, banks increased the lending rates charged to less creditworthy individuals and small businesses. Private equity barons and other well-connected figures on Wall Street, on the other hand, were able to borrow for peanuts. During the post-crisis decade, incomes barely grew and low-paying jobs proliferated. The less well-off were forced to borrow at high rates and received negative real returns on their deposits, while wealthy speculators and corporations borrowed cheaply and made out handsomely. This book is about the role of interest in a modern economy. It was inspired by a Bastiat-like conviction that ultra-low interest rates were contributing to many of our current woes, whether the collapse of productivity growth, unaffordable housing, rising inequality, the loss of market competition or financial fragility. Ultra-low rates also seemed to play some role in the resurgence of populism as Sumner’s Forgotten Man started to lose patience.
• Rente is nodig voor de allocatie van kapitaal, om het risico van investeringen te evalueren en om investeerders ervan de verhinderen te hoge risico's te nemen:
  The most important question addressed in this book is whether a capitalist economy can function properly without market-determined interest. Those, like Proudhon, who argue that interest is fundamentally unjust don’t believe in its necessity. To modern monetary policymakers, interest is viewed primarily as a lever to control the level of consumer prices. From this perspective, there’s no problem in taking interest rates below zero to ward off the evil of deflation. But influencing the level of inflation is just one of several functions of interest, and possibly the least important. The argument of this book is that interest is required to direct the allocation of capital, and that without interest it becomes impossible to value investments. As a ‘reward for abstinence’ interest incentivizes saving. Interest is also the cost of leverage and the price of risk. When it comes to regulating financial markets, the existence of interest discourages bankers and investors from taking excessive risks. On the foreign exchanges, interest rates equilibrate the flow of capital between nations. Interest also influences the distribution of income and wealth. As Bastiat understood, a very low rate of interest may benefit the rich, who have access to credit, more than the poor.
• Het ontstaan van interest:
  Some suggest that interest may have originated with the payment of blood money, known as Wergild, as compensation for murder and other injuries, with ‘interest’ as a penalty payment over and above the value of the injury.1 On the other hand, the French anthropologist Marcel Mauss in The Gift (first published in 1925) maintains that interest began with the practice of reciprocating gifts among tribal people.fn1 Prehistoric peoples probably charged interest on loans of corn and livestock. The association between interest and the fruit of a loan is embedded in ancient languages. Across the ancient world the etymologies of interest derive from the offspring of livestock.
• Schuldencrisissen waren er al in Mesopotamië, meestal leidend tot schuldkwijtschelding:
  Debt crises, exacerbated no doubt by the horrors of compound interest, were a regular feature of Mesopotamian history. It is perhaps no coincidence that Enmetena of Lagash was also the first ruler in the ancient world to proclaim a debt cancellation. After Lagash’s first debt relief another followed roughly fifty years later. The fiftieth year was also that appointed in the Book of Leviticus for proclaiming debt jubilees or clean slates in Ancient Israel. Afterwards, Babylonian debt write-offs were customarily announced at the start of a new reign.fn7 Debt jubilees subsequently occurred in Ancient Greece and later still in Rome. In 594 BC, the Athenian Solon, known as the ‘Lawgiver’, announced the ‘shaking off of the burdens’. Solon ordered the smashing of mortgage stones (horoi) which marked out an indebted property, thereby releasing citizens from debt bondage. He also reduced the rate of interest.32 Aristotle claims that prior to these reforms ‘the poor together with their children were enslaved to the rich.’
• Eeuwenlang rentenvoeten kennen een dalende trend, maar daar zitten waarschijnlijk geen economische redenen achter:
  Over the centuries, interest rates in the ancient world declined substantially, but their long-term downward trend appears to have been more influenced by changes to the standard of measurement rather than economic factors. Under the Babylonian sexagesimal system, interest on silver loans was charged at the rate of one-sixtieth per month. The Greeks, who introduced a decimal system, charged standard interest at 10 per cent per annum. Under the Roman duodecimal system, interest was usually at one-twelfth of principal, or 8.33 per cent a year.40 Keynes, who studied Babylonian monetary history while researching his Treatise on Money, believed that interest rates were determined by custom rather than market forces. As his disciple Joan Robinson put it, interest has a ‘Cheshire cat grin [which] … remains after the circumstances which gave rise to it in the past have completely vanished’.41 Marx held a similar view, writing that ‘customs, juristic tradition, etc., have as much to do with determining the average rate of interest as competition itself.’
• Rentevoeten doorheen de geschiedenis waren niet gecorreleerd met economische groei (moderne verise van deze vaststelling: zie Richard Werner). Idem dito overigens voor de groei van de bevolking:
  It is clear that interest rates were not correlated with economic growth, either in the ancient world or afterwards. In the first millennium of the current era, global economic growth has been estimated at a mere 0.01 per cent per annum. Yet, during this thousand-year period, real interest rates in Europe ranged between 6 and 12 per cent.50 Nor do we observe any connection between the interest rate and demographic change. In fact, population growth and interest rates have often moved in opposite directions.
• Geschiedenis leert ons weinig over de vorming van de rentevoeten:
  In short, the ancient history of interest provides no strong support for any particular view as to how the rate of interest is formed. Law and custom obviously played an important role. Yet occasional changes in the quantity of money in circulation also appear to have influenced interest rates. Market forces were at play, to some extent at least. We see them in the variety of rates on offer and in the risk premiums charged on certain loans.56 As major lenders, temples and palaces had an influence on the supply of credit and its price (interest), just as the modern central bank does today. The great difference is that in ancient times loans consisted of some commodity, such as silver, whereas nowadays a central bank is able to conjure fiat money out of thin air. In the twenty-first century it is much easier for the authorities to manipulate the rate of interest than in ancient times.
• Krediet bestond voor geld, en van het allereerste begin werd er rente gevraagd op het krediet:
  Adam Smith famously claimed that humans have a ‘propensity to truck, barter, and exchange’. It would seem that they have just as strong a propensity to borrow and lend, and in doing so to charge interest. Anthropologists no longer accept that money originated to replace barter, as classical economists, including Smith, had maintained. There is no evidence for this barter-to-money myth. On the contrary, it seems likely that credit antedated money and that the earliest forms of credit bore interest.
• Rentevoeten en productiviteit van kapitaal zijn wel gerelateerd;
  It seems obvious that the rate of interest and the productivity of capital, in this case the farm surplus, should bear some relation to each other. Interest is required to place a value on long-lasting assets, such as housing. Ancient Sumer and its successor civilizations constructed the first large cities. From the third millennium onwards, there was a market for private buildings. Since houses could be bought on credit and rented out, it was natural that mortgages should yield something. It is notable that when the Emperor Augustus flooded Rome with treasure, interest rates fell and house prices rose. Little has changed since then. Two millennia later, property markets remain sensitive to changes in the money supply and interest rates.
• Het belangrijke inzicht van Turgot:
  For Turgot, the world of finance was a mirror held up to the world, with real and financial assets exchangeable for each other. Since land, buildings and factories produce income, so money must yield interest. This important insight is too often overlooked by modern economists.
• Redenen voor het bestaan van rente:
  - leningen zijn productief en zelfs indien niet hebben ze waarde
  - zij die kapitaal bezitten moeten aangemoedigd worden om te lenen en lenen is risicovol
  - productie heeft tijd nodig en mensen zijn ongeduldig
  Interest exists because loans are productive, and even when not productive still have value. It exists because those in possession of capital need to be induced to lend, and because lending is a risky business. It exists because production takes place over time and human beings are naturally impatient. Earlier generations of economists, who considered the problem of interest more deeply than their twenty-first-century counterparts, had no doubt as to its importance. For Böhm-Bawerk, interest was ‘an organic necessity’.65 Irving Fisher called interest ‘too omnipresent a phenomenon to be eradicated’.66 In similar vein, Joseph Schumpeter stated that interest ‘permeates, as it were, the whole economic system’.67 The author of Das Kapital, an avowed enemy of interest, agreed with this arch-apologist for capitalism. In a phrase evocative of the ancient world in which a charge for lending was first recorded, Marx writes that ‘usury lives in the pores of production, as it were, just as the gods of Epicurus lived in the space between worlds.’
• Kritiek op rente is echter altijd gebleven, zowel van links als van rechts als vanuit het centrum:
  Criticism has come from the left and from the right. Marx detested interest, but then so did Hitler. A few years ago, the Archbishop of Canterbury launched an attack on a UK payday lending firm, which he believed took advantage of the needy and desperate.
• Rente is een fenomeen van tijd: lenen "overbrugt" tijd (vandaar dat het risico is en dat een pand of hypotheek wordt gevraagd, van het allereerste begin):
  That’s why creditors from Babylonian times onwards have always taken collateral for the period of a loan. Aristotle overlooks the fact that lending takes place across time – that it is an intertemporal transaction, a curious omission given his writings on the nature of time. Interest is a charge for the use of money over a certain period of time.
• Rente en kapitaal:
  From a technical viewpoint, capital consists of a stream of future income discounted to its present value. Without interest, there can be no capital. Without capital, no capitalism. Turgot, a contemporary of Adam Smith’s, understood this very well: ‘the capitalist lender of money,’ he wrote, ‘ought to be considered as a dealer in a commodity which is absolutely necessary for the production of wealth, and which cannot be at too low a price.’53 (Turgot exaggerated. As we shall see, interest at ‘too low a price’ is the source of many evils.)
  For Turgot, a sum of money delivered immediately and the promise of the same amount of money at some future date could not possibly have the same value. Time preference explains why Aristotle was wrong. Interest is the difference in monetary values across time, the rate at which present consumption is exchanged for future consumption. Interest represents the time value of money.
• Rente als "time preference" en waarom rente nooit afgeschaft kan worden, en zeker niet negatief kan zijn:
  Exponents of time preference see it as a universally valid and all-embracing phenomenon. Irving Fisher maintained that impatience (i.e. positive time preference) is a ‘fundamental attribute of human nature’. The Austrian Ludwig von Mises, a pupil of Böhm-Bawerk’s, believed ‘time preference [and therefore interest] is a category inherent in every human action.’57 Fisher, who had little else in common with Mises, agreed on this point: interest, he wrote, ‘must be inherent in all buying and selling, and in all transactions and human activities which involve the present and the future’.58 Mises held that it would be impossible to abolish interest. His American disciple Murray Rothbard asserted that ‘future satisfactions are always at a discount compared to present satisfactions.’59 If this statement is true, then the interest rate must also always be positive and a negative rate of interest is unnatural.
  Time preference also determines how long investors are prepared to wait for a return on their capital. It was John Rae, a little-known early nineteenth-century Scottish economist, who first mooted a connection between investment and time preference (for which he was later credited by Böhm-Bawerk and Fisher). The formation of capital, said Rae, ‘implies the sacrifice of some smaller present good, for the production of some greater future good’.
• De waarde van kapitaal en rente zijn omgekeerd evenredig:
  Capital value and interest are inversely related: a high discount or ‘capitalization’ rate produces a low capital value and vice versa. An anonymous pamphlet, published in 1621, claimed that ‘land and money are ever in balance one against the other; and when money is dear, land is cheap, and where land is cheap money is dear.’68 Without interest, it would not be possible to put a price on an acre of land, Sir William Petty observed half a century later. Rents in future years must be worth less than this year’s rent, Petty said, otherwise ‘an acre of land would be equal in value to a thousand acres of the same land; which is absurd, an infinity of units being equal to an infinity of thousands.’fn7 In the following century, Adam Smith described how the price of land depended on the market rate of interest. In The Wealth of Nations (published in 1776) Smith noted that land prices had risen in recent decades as interest rates declined.
• Locke was correct m.b.t. de nadelen van te lage rente en goedkoop geld (nadelig voor spaarders maar goed voor financiers en CEO's, goed voor papierwelvaart maar nadelig voor echte welvaart; lage rentevoeten zet banken aan om geld in reserve te houden en uit de economie --> deflatie, lage rentevoeten verlagen de schuldenniveau's niet maar zetten daarentegen aan tot excessief lenen en leidt niet tot robuuste economische groei) :
  After a decade and more of unconventional monetary policies, it appears that Locke was prescient. As we describe in later chapters, the central bankers’ policy of ultra-low interest rates hurt savers (‘widows and orphans’) while benefiting financiers and senior executives, who reaped windfall gains after the cost of borrowing fell below corporate profitability. Paper wealth has multiplied while genuine wealth has stagnated. Locke’s suggestion that the lowering of interest would induce banks to hoard, thereby slowing the circulation of money and promoting deflation (‘raising the value of money’) also came to pass. Nor did the collapse of interest rates bring about a reduction in debt levels, as the younger Culpeper promised, but induced excess borrowing, as Locke had foreseen. Finally, the dramatic collapse of interest rates failed to deliver a robust economy: ‘if ill husbandry has wasted our riches, [we cannot] hope by such kind of laws [i.e., lowering interest rates] to raise them to their former value.’ Once again, Locke was spot on.
• Financiele crises: de onvermijdelijke John Law
  This was only the first step. A year later, Law took over a company that possessed monopoly trading rights and land claims to French Louisiana, an area covering roughly half the current landmass of the United States (excluding Alaska). The Company of the Indies is better known to posterity as the Mississippi Company. Law subsequently merged this business with France’s other trading monopolies (the Senegal, East India and China companies), along with the tobacco monopoly, the contract to farm the royal taxes and the mint. To cap it all, in the late summer of 1719 Law arranged for the Mississippi Company to take over France’s entire national debt, in exchange for an annual payment. Government creditors were given the opportunity to swap their bonds for shares in Law’s company. In the space of three years, the Scotsman had created ‘the most colossal financial power ever known’.13 His System, encompassing commercial, debt management and banking operations, was the most ambitious economic experiment prior to the Russian Revolution.
• Problemen met de "goud wissel standaard" (>< goudstandaard)
  The Gold Exchange Standard was intended to be more ‘elastic’ than its predecessor. But elasticity brought its own problems. Credit imbalances between countries could now run for longer without being corrected. Interest rates were no longer automatically determined by international bullion flows. For instance, the United States received large inflows of foreign capital in the early 1920s but the Federal Reserve ‘sterilized’ these inflows by selling bonds.fn3 As the French economist Jacques Rueff later noted, the Gold Exchange Standard ‘reduced the international monetary system to a mere child’s game in which one party had agreed to return the loser’s stake after each game of marbles’.8 For the first time it became possible for central bankers to conduct an ‘active’ monetary policy in pursuit of certain economic objectives.fn4 But the central bankers’ newfound discretion meant that the setting of interest rates inevitably became politicized, especially in Britain, whose attempt to return sterling to the Gold Standard was accompanied by high interest rates, unemployment and lingering deflation. By the summer of 1920, the Bank of England’s lending rate had climbed to 7 per cent. When Norman attempted to tighten further, he was opposed by the Chancellor of the Exchequer, Austen Chamberlain. ‘Interest rates,’ Norman told an official at the New York Fed, ‘are now a political as well as a financial question.’9 Years later, the Bank of England Governor remarked to his counterpart at the Bank of France that he could not raise interest rates ‘without provoking a riot’.10 The social tensions produced by Britain’s high interest rates and an uncompetitive exchange rate eventually erupted in the General Strike of 1926. Britain’s ill-fated return to gold turned Keynes into a vehement critic of the Gold Standard and of high interest rates in general. ‘So long as unemployment is a matter of general political importance,’ he wrote in 1923, ‘it is impossible that Bank rate should be regarded, as it used to be, as the secret peculium of the Pope and Cardinals of the City.’11 For the rest of his life, the world’s most prominent economist never missed an opportunity to advocate lower interest rates.
• Discussie over de taak van centrale banken en de wisselwerking tussen stabiliseren van de economie en het aanmoedigen van speculatie:
  The Swedish economist Gustav Cassel endorsed Strong’s view that it was the business of central bankers to maintain price stability and not to concern themselves with the stock market.22 One of the aims of US monetary policy in the 1920s was to dampen the seasonal fluctuations of interest rates caused by the agricultural cycle, which led to money being tight at certain times of the year. The Fed was so successful in this respect that Treasury Secretary Andrew Mellon went so far as to hail an end to the cycle of boom and bust. ‘We are no longer the victims of the vagaries of business cycles. The Federal Reserve System is the antidote for money contraction and credit shortage,’ Mellon declared a year after the Long Island meeting.23 By taming the business cycle, however, the Fed inadvertently encouraged speculative behaviour. As economist Perry Mehrling writes: ‘Intervention to stabilize seasonal and cyclical fluctuations produced low and stable money rates of interest, which supported the investment boom that fueled the Roaring Twenties but also produced an unsustainable asset price bubble.’
• De rol van "hoge" rentevoeten in de boom van de jaren 20, plus productiviteitsgroei houdt inflatie onder controle (niet de "hoge" rentevoeten)
  The absolute level of interest rates played a key but less obvious role in fostering Wall Street’s boom. If the natural rate of interest is revealed by a stable price level, as Wicksell and his followers maintained, then the Fed’s interest-rate policy before and immediately after the Long Island meeting was appropriate. As we have seen, after 1921 the index of US consumer prices remained flat for the rest of the decade. The cost of borrowing after inflation – what Irving Fisher was the first to refer to as the ‘real’ interest rate – remained relatively high throughout this period.25 Between 1922 and 1929, the Federal Reserve discount rate averaged more than 4 per cent in real terms. Had interest rates been any higher, then the index of consumer prices would almost certainly have declined.
  Viewed from a different perspective, however, the Fed’s interest-rate stance was lax. Wicksell claimed that the natural rate of interest derived from the economy-wide return on capital. Although the natural rate is unseen, it can be roughly surmised from an economy’s trend growth rate.fn6 The 1920s were a period of remarkable productivity growth, brought about by electrification and other new technologies and by improved management techniques (known as ‘Fordism’). Between 1923 and 1928, the US economy grew at an annual rate of nearly 8 per cent. Yet the New York Fed’s discount rate averaged less than half this number. If the index of consumer prices gave no sign that interest rates were too low it was because the supply-side improvements, which generated productivity gains, also kept inflation at bay.
• Goedkoop geld doet de beurs draaien en veroorzaakt bubbels (asset inflation):
  Loans on securities accounted for almost a third of lending by Federal Reserve member banks. By early 1929, total outstanding broker loans had reached almost $7 billion.28 The more money that poured into the stock market, the higher stock prices climbed. Towards the end of the decade, shares on the New York Stock Exchange were changing hands at bubble valuations.fn8 Companies with exciting new technologies, such as Radio Corporation of America and General Motors, whose profits lay in the distant future, attracted the most fervid attention. Benjamin Anderson thought the 1920s market similar to the late 1890s boom: ‘“Cheap money” characterized both “new eras,” and cheap money is the most dangerous intoxicant known to economic life, especially if it be prolonged through many years.’
  By placing too low a discount on the future earnings of companies, investors ended up paying too much. The discounting error was widely acknowledged at the time. In early 1928, Moody’s Investors Services declared that stock prices had ‘over-discounted anticipated progress’.30 After the crash, Benjamin Graham and David Dodd wrote in their book Security Analysis that the late 1920s witnessed ‘a transfer of emphasis [in the valuation of stocks] from current income to future income and hence inevitably to future enhancement of principal value’.31 Or, as the market analyst Max Winkler memorably described: ‘The imagination of our investing public was greatly heightened by the discovery of a new phrase: discounting the future. However, a careful examination of quotations of many issues revealed that not only the future, but even the hereafter, was being discounted.’32 Relatively low interest rates in the United States spurred massive outflows of American capital to countries which offered higher yields. The Dawes Loan of 1924 had seemingly settled Germany’s reparation problems. Interest rates in Germany, then emerging from its hyperinflation, were mouthwatering compared to those in the United States. Throughout 1925, German call money rates averaged 8½ per cent, three times more than US Treasury bills. ‘The market for high yield foreign bonds in the United States seemed insatiable,’ Anderson observed.
  Easy money may kindle animal spirits, but a slight tightening of monetary policy is rarely sufficient to extinguish a speculative inferno, as America’s inexperienced central bankers were to discover. Credit growth continued to outpace US economic growth, broker loans continued soaring and the stock market continued its near vertical ascent (between February 1928 and August 1929, the Standard & Poor’s Composite index climbed by nearly 30 per cent).
• Het begin van de grote depressie:
  Higher rates in the United States, in particular the generous interest offered on margin loans, caused the flow of international capital to reverse direction. American investors now pulled their loans from Europe, while Europeans stepped up their lending to Wall Street. ‘Wall Street has become a colossal suction-pump, which is draining the world of capital, and the suction is fast producing a vacuum over here,’ lamented the British press baron Lord Rothermere.46 Both Germany and Britain suffered gold losses and were forced to hike interest rates. The Bank of France became less co-operative than ever. In October, Ben Strong succumbed to tuberculosis. All this was too much for his friend Montagu Norman, who sank into a black depression. The Bank of England’s Deputy Governor, Cecil Lubbock, a victim of his chief’s frequent tantrums, also suffered a nervous breakdown.47 The reversal of capital flows back out of Europe set off a time bomb that eventually exploded with the October 1929 Wall Street crash, followed eighteen months later by the collapse of Austria’s largest bank, the Creditanstalt (een Rothchild bank, TFB) The more immediate effect was to cut Europeans off from the supply of American credit, which forced them to reduce their purchases of US manufactures. It was only a matter of time before US industrial production started to contract. By 1928, various regional housing bubbles across the United States, from Florida to Illinois, were collapsing.
• Keynes was in die tijd van mening dat kredietinflatie een teken van onevenwichtige rente was, niet goedereninflatie. Later veranderde hij - zoals wel vaker - van gedacht.
  Keynes appeared to be suggesting that credit inflation, and not the inflation of consumer prices, was the true sign that interest rates were out of equilibrium – a position close to Hayek’s from which he soon reneged.
• Het enigma Alan Greenspan - libertair maar eigenlijk gewoon een interventionist:
  Despite this radical libertarian background, Greenspan was to prove an interventionist central banker. During his tenure as Fed Chairman, monetary policy was frequently tweaked to give the financial markets what they wanted. For which Greenspan earned lavish praise, becoming in time a totemic figure to Wall Street, a monetary shaman whose indecipherable incantations had the power to keep markets aloft. Senator John McCain once jested that if Greenspan were to die in office, he’d prop him up and put dark glasses on him. Hailed as the ‘greatest central banker ever’ at the close of his near two-decade tenure, Greenspan’s real achievement was to inflate a series of asset price bubbles and protect investors from the worst of the fallout. Before switching to economics, Greenspan had studied clarinet at New York’s Juilliard School. His riffs on monetary policy were hard to follow. Early in his tenure, he remarked that, ‘if I turn out to be particularly clear, you’ve probably misunderstood what I said.’ H. G. Wells’s description of that other long-serving central banker Montagu Norman – whom the novelist described as one of those ‘strange Mystery Men … dimly visible through a fog of battling evasions and misstatements, manipulating prices and exchanges’ – applies as well to Greenspan.
• De bewijzen dat negatieve reële rentevoeten hebben bijgedragen tot de huizenbubbel van 2000''s zijn zeer sterk:
  Likewise, Poole’s counterpart at the Kansas City Fed, Thomas Hoenig, found ‘strong supporting evidence’ for the argument that negative real interest rates between 2002 and 2004 had contributed to the housing and credit boom.35 Some leading economists concurred. Anna Schwartz, who had earlier extolled the goal of price stability, now pinned responsibility for the subprime crisis on the Fed: ‘the basic underlying propagator [of the crisis] was too-easy monetary policy and too-low interest rates that induced ordinary people’ to borrow and speculate.fn8 Professor John Taylor of Stanford University, author of the ‘Taylor Rule’, a central banker’s rule of thumb for setting interest rates (based on inflation expectations and estimates of spare capacity in the economy), suggested that ‘monetary excesses were the main cause of the boom and the resulting bust’.
• Problemen met kwantifatieve doelen:
  Quantitative targets tend to get chosen because they are easy to quantify. But factors that aren’t easily measured tend to get overlooked. As a result, the use of targets is associated with a variety of adverse outcomes, including short-termism, the diversion of resources into bureaucracy, risk aversion, unjustified rewards, and the undermining of institutional culture.
• Rentevoeten worden bepaald door het monetaire regime:
  Borio’s team scoured the historical data for evidence of Hume’s contention that the rate of interest was determined by real factors. But they found little relationship between interest rates and savings, investment or profits. There wasn’t even a stable link between demographics and interest rates.fn3 Instead, the BIS suggested that interest rates were influenced by monetary regimes. Just as Babylonian interest rates had been higher than those in Ancient Greece, so real interest rates were higher on average under the Gold Standard (pre-1914) than under the Bretton Woods system (after 1945), and lowest of all after Bretton Woods (from 1971 onwards).
• Wat bepaalt in werkelijkheid de rentevoeten? Niet de reële economie:
  BIS economists also questioned the conventional wisdom concerning the ‘natural rate’ of interest (depicted as r-star or r* in academic jargon). In theory, the natural rate is the rate at which the economy hums along at its greatest potential while inflation remains under control. But Borio argued, as Hayek had done in the 1920s, that a stable price level doesn’t necessarily indicate that market rates are at an equilibrium level. The fact that the financial crises of 1929 and 2008 both occurred at times of low and stable inflation suggests that conventional wisdom is mistaken. If a stable price level doesn’t reliably indicate the natural rate, then it’s difficult to see how central bankers could discover it. Instead, Borio developed his own financial cycle, based on credit growth and asset prices, which he believed provided a better indicator of an economy’s potential output and deviations from sustainable growth.
• Financiële onevenwichten ontstaan net in periodes van lage inflatie en lage rentevoeten, de financiële crisis die erop volgt, "dwingt" centrale banken ertoe de rentevoeten nog verder ter verlagen: lage rentevoeten --> nog lagere rentevoeten
  The idea that errors in monetary policy might produce economic distortions, other than disturbances to the price level, was not countenanced by the central banking establishment. But Borio’s research led inexorably to this conclusion. Financial imbalances – a polite term for credit booms and speculative manias – tend to form during periods of low interest rates and low inflation, he noted.fn5 Before the financial crisis, global interest rates were low both in real terms and relative to the growth rate of the global economy. Credit booms and real estate bubbles often produce nasty economic shocks and are followed by weak recoveries. The post-Lehman economy conformed to earlier precedents, notably Japan’s after 1990. Central bankers responded to economic stagnation after 2008 by pushing rates even lower. Thus, low rates begat low rates.
• En daar was Mario Draghi, juridische en economische wetmatigheden negerend om de euro te redden en de bank flink te laten verdienen:
  Then along came Mario Draghi (a former economics professor, Goldman Sachs managing director and, lately, Governor of the Bank of Italy), the incoming President of the European Central Bank, with his July 2012 promise to ‘do whatever it takes’ to hold the Eurozone together. Never mind the clause in the ECB’s constitution which forbade bailouts of member countries – that could be fudged. This wasn’t a solvency crisis, said Draghi, it was a liquidity crisis. (In truth, so long as an entity is supported by a central bank, there can be no insolvency.) Never mind that monetary policy was no substitute for the political and economic reforms necessary for the long-term survival of the single currency – that could be ignored for the moment. What mattered was that the markets believed in the ECB’s firepower. Backed by Draghi’s hard commitment, banks in Spain, Portugal and Italy used cheap loans from the ECB to buy their own sovereign debt, pushing down credit spreads and making a lot of money in the process.16 Draghi successfully extinguished Europe’s debt crisis and saved the Single Currency, but soon enough a different problem became evident.
• Zero rentevoeten creëerde heel wat zombiebedrijven (bedrijven die insolvabel zijn maar die dankzij nul rente overeind kunnen blijven). Deze bedrijven leggen een hypotheek op de economie:
  Zero interest rates kept loss-making companies on life support. By 2016, the Organisation for Economic Co-operation and Development found that 10 per cent of firms were unable to cover their interest payments from profits – the OECD’s definition of a zombie. Europe, it seemed, was turning Japanese. The zombie phenomenon was not confined to continental Europe. In both the United States and United Kingdom, ultra-low rates forestalled corporate bankruptcies. The default rate on US junk bonds after the Great Recession was just half the average of the two previous downturns. ‘The Fed’s extraordinary intervention,’ credit analyst Martin Fridson suggested, ‘enabled companies [to survive] that should have failed.’21 In Britain, the insolvency rate was also lower in the 2008–9 recession than during the milder economic downturn of the early 1990s. In Britain, around one in ten small businesses were kept alive on the drip of easy money.22 ‘Avoiding insolvency is the new norm,’ protested an unhappy member of the British Association of Recovery Professionals.23 The lowest insolvency rates were reported by Greece, Spain and Italy – the countries hit hardest by the sovereign debt crisis and where one might have expected to see the greatest concentration of bankruptcies. Italy had the worst zombie infestation. Industrial overcapacity was rife. The country was home to some two dozen cement producers, many of them limping along thanks to ‘financial doping’.24 Italian clothing company Stefanel was a typical zombie. Out-performed by strong competitors, the Veneto-based fashion firm produced a string of losses and went through several debt restructurings. Its share price collapsed. Stefanel clung on thanks to loan forbearance from its banks and the ECB’s negative interest-rate policy. Eventually, in June 2019, its shares were suspended after the company announced it was applying for special administration under bankruptcy law.
• Maar zombies zijn niet het enige gevolg van ultra lage rentevoeten:
  Zombies aren’t the only malinvestments induced by ultra-low interest rates. Easy money encourages people to invest in projects whose returns lie in the distant future.31 Residential property is a long-duration asset and construction booms facilitated by low interest rates are a common form of ‘malinvestment’. After the US real estate bubble imploded in 2006, housebuilding was depressed for several years. With interest rates lower than ever, investors went in search of other types of long-dated investments. Silicon Valley was only too happy to supply their needs.
• Over het algemeen leiden lage rentevoeten ertoe dat te veel kapitaal vloeit naar verlieslatende ondernemingen en activiteiten. In feite betekent dit kapitaaldestructie, het ergste wat een economie kan overkomen:
  The large-scale misallocation of resources into loss-making businesses whose profits exist in Never-Never Land is a sign that the cost of capital is too low. Bring down interest rates low enough and even unicorns can fly and, soaring too high, they inevitably crash. Prior to its planned 2019 initial public offering, WeWork’s valuation was estimated at $47 billion. Wall Street’s suspension of disbelief cracked before the IPO got underway, however, and some $40 billion was wiped off its private market value. A tale not so much of creative destruction, but of capital destruction on a grand scale.
• Dit alles leidt ultiem tot een ineenzakkende productiviteit:
  Economies on both sides of the Atlantic experienced a collapse in productivity growth in the post-crisis decade. Annual productivity growth in the United States, at 0.5 per cent, was a quarter of its level two decades earlier. The output per hour of British workers hardly budged – the most dismal productivity performance since the Industrial Revolution. The Eurozone’s GDP per capita actually declined in the 10 years after 2008. The collapse in productivity was not foreseen by the central bankers – it wasn’t comprehended by their models. To policymakers, productivity was a ‘conundrum’ and a ‘puzzle’, then it became a ‘drag’ and, later, a ‘challenge’. Heads were scratched. Academic papers written. Civil servants consulted.
• Goedkoop geld werd niet gebruikt om te investeren maar bvb. tot de inkoop van eigen aandelen:
  Naturally, firms that weren’t operating at full throttle had little reason to invest. Weak capital spending went hand in hand with weak corporate sales and household spending. Heightened uncertainty about the future led firms to defer investment, although the extent to which this uncertainty (as measured by the dispersion of economic forecasts) was due to the persistence of crisis-era monetary policies was itself a matter of debate.46 To make matters worse, executive compensation schemes encouraged firms to use cheap debt to buy back their shares rather than invest in the future.
• Minder investeringen--> minder kapitaal --> lagere productiviteit (maar FED wou eigen rol hierin nooit erkennen)
  Investment in the United States declined to the point that the existing capital stock grew rusty with neglect.47 A 2017 study from the New York Fed found that, adjusted for the faster depreciation rates of new technology, the United States had enjoyed little net investment in previous years. Without adequate investment, the economy stumbled. A decline in the growth of a country’s capital stock implies lower future output growth.48 Even the Federal Reserve agreed that falling investment in the United States contributed to the slowdown in productivity growth.49 What the Fed didn’t acknowledge – couldn’t acknowledge – was that monetary policy played any role in this matter. An increasing body of research suggests that zombies lay behind the productivity debacle. Businesses that couldn’t service their debts invested less. Zombies discouraged other firms from investing too.50 Zombies hindered new business formation since entrepreneurs had little incentive to enter sectors plagued with excess capacity and miserable returns. Zombies slowed the adoption of new technologies and business practices.
  After the financial crisis, the Fed worked tirelessly to douse fires and protect the economy’s understory. Zombie companies proliferated in the forest, stronger firms struggled with weaker competitors for capital and sales. New businesses had trouble propagating, except for unicorns that were seeded in the rich compost of free capital and grew up rapidly, tall and weed-like. The thicket of dead and sickly businesses grew ever more dense, awaiting the next, potentially more devastating, conflagration.
• Ander gevolg: de financiëlisering van industriële ondernemingen, die zich meer en meer gaan toeleggen op financiële activiteiten:
  General Motors was once the epitome of US industry. As the car maker’s post-war CEO Charlie Wilson commented, ‘what was good for our country was good for General Motors.’ Half a century later, General Motors was an emblem of this financialization. Prior to the financial crisis, the Detroit car manufacturer ran a mortgage business (GMAC) that specialized in subprime lending and spent tens of billions of dollars repurchasing shares.47 A month after Lehman’s failure, GM filed for bankruptcy – an event induced as much by pension liabilities as falling car sales. Yet only a year after emerging from Chapter 11 administration, GM spent heavily to acquire a subprime car-financier.fn3 And as the car industry faced the challenge of shifting to the manufacture of electric vehicles, GM was once again diverting billions of dollars to buybacks.48 Another iconic American company, John Deere, found better ways to mint money than by beating ploughshares. The ‘Bank of John Deere’ became one of the largest farm lenders in the United States, providing farmers with loans for seeds, chemicals and fertilizers. The credit business accounted for a third of Deere’s net income.49 In the post-crisis period, Deere repurchased more than $12 billion-worth of shares and nearly doubled its debt load.50 At around the same time, AT&T became the most leveraged non-financial company in the world after its 2016 acquisition of HBO owner, Time-Warner. Ma Bell’s net debt of around $250 billion (including off-balance-sheet liabilities) was equivalent to the combined sovereign debts of Thailand and Portugal.
• QE (quantatative easing) leidde niet tot een herstel van de economie, maar creëerde wel een nieuwe bubbel --> asset inflation was gigantisch, vooral in de aandelenmarkten. Techbedrijven leidden zoals steeds de dans.
  During the financial crisis, the New York Fed stumped up tens of billions of dollars to bail out the investment bank Bear Stearns and insurance giant AIG. Morgan Stanley, Goldman Sachs and other Wall Street firms were encouraged to convert into bank holding companies so they could borrow directly from the Fed. On its own account, the US central bank acquired vast amounts of Treasury bonds and mortgage securities. By the end of 2008, the Fed’s balance-sheet footings exceeded $2 trillion, more than double the level a few months earlier. Fed staffers referred to ‘large-scale asset purchases’, but the rest of the world knew it as quantitative easing (QE). On 6 March 2009, the S&P 500 index reached a low of 666 – the number of the Beast. Investors had been put through hell and now it was time to come back. In the same month, the Fed extended its asset purchases and launched a $200 billion fund (the term asset-backed securities loan facility, or TALF) to help private investors acquire distressed securities at bargain prices. The stock market took off. By Thanksgiving, the S&P 500 was up more than two-thirds. A decade later, the benchmark index was up more than fourfold from the trough and American stocks were more expensive on most valuation measures than at the peak of the Dotcom folly. Other telltale bubble indicators were visible: corporate leverage was extended, stock market bulls outnumbered bears by the highest ratio in decades, and margin debt was at an all-time high.15 In the words of one investment manager, this constituted ‘the broadest equity market bubble in history’.16 It was also the longest period of uninterrupted stock gains ever witnessed. By the tenth anniversary of Lehman’s bankruptcy, the US bull market had been running for 3,453 days.17 No wonder the bears headed for the woods. Yet the ascent of the stock market can’t simply be ascribed to irrational exuberance; shares still looked relatively good value when their yields were compared to the miserable coupons provided by US Treasuries.fn2 As long as long-term interest rates remained low, the great bull market had the wind behind it. Stock market bubbles often favour technology companies. This has been the case from the 1690s’ mania in London’s Exchange Alley for diving-bell stocks through to the internet bubble three centuries later. Exciting new innovations attract speculators because their profitability can only be imagined. But there’s another reason: since most of their profits lie in the distant future, the valuation of technology companies (also known as ‘growth companies’) is inflated when the discount rate falls. During manias, speculators are said to engage in ‘hyperbolic discounting’. In the years after 2008, investors who failed to load up on the fabulous FAANGs (Facebook, Apple, Amazon, Netscape and Google), companies with monopoly positions and superior growth prospects, were left in the dust. In their frenzy for earnings growth, investors were prepared to overlook a lack of current earnings. Around three-quarters of IPOs that came to the market in 2018 were loss-making – the same proportion as at the height of the Dotcom bubble. As one tech analyst commented: ‘The rise in unprofitable IPOs reflects the general preference in both public and private markets for growth over profitability.’18 Silicon Valley’s unicorns attracted higher valuations at each funding round, even as losses outpaced sales. A fortunate few, such as Uber and Lyft, made it to the public markets, where they jostled for attention with another company that had long promised, or rather over-promised, the imminent arrival of self-driving cars. In 2017, the market capitalization of Elon Musk’s Tesla Inc. accelerated past General Motors.19 Three years later, Tesla was valued at more than Toyota, even though the Japanese car maker produced over twenty times as many vehicles. For this valuation to hold, Musk would have to produce millions more cars every year, and to achieve that Tesla required a great deal of investment. Given that its bonds were rated junk, this was a potential concern.
• In een tijd van ultra-lage-rentevoeten tijd heeft geen kost:
  In the era of ultra-low interest rates, time had no cost. Investors’ appetite for concept stocks at nosebleed valuations extended well beyond autonomous cars (Tesla) to animal-free protein (Beyond Meat), biotech (gene therapy stocks), Chinese internet (Alibaba, Tencent) and cloud computing. Investors were flying high. During an outbreak of ‘marijuana madness’ in September 2018, a Canadian cannabis producer was briefly valued at more than American Airlines.
• Asset inflation leidt tot welvaart, welvaart waarvoor men vrijwel niets hoeft te doen:
  The broad inflation in the prices of bonds, stocks, real estate, cryptos and just about every other financial asset produced an extraordinary surge in wealth. In the years between the stock market trough in early 2009 and the tenth anniversary of Lehman’s bankruptcy, US household wealth nearly doubled. By late 2018, American households were worth more than $100 trillion, a sum equivalent to five times US GDP. By comparison, household wealth in the post-war decades averaged just over three and a half times GDP. Total household wealth was higher than at its twin peaks in recent real estate and internet bubbles.28 Never before had Americans been so rich. Never before had they done so little to amass so much wealth.
• Maar het is "virtuele" welvaart, het zijn vorderingen op welvaart, niet welvaart zelf:
  On Ruskin’s gravestone are engraved the words, ‘there is no wealth but life’. In the twentieth century, Ruskin’s conception of wealth was taken up by another self-taught economist, Frederick Soddy. A chemist by training who had received a Nobel prize for work on radioactive isotopes, Soddy held that life is a struggle for energy and that capital was really a form of stored energy: ‘All wealth is the product of work, in the physical sense of the expenditure of available energy,’ he wrote. Soddy thought it absurd to measure wealth by exchange value since speculators could push up the price of commodities ‘without any addition to the national wealth’. Soddy concluded that ‘the “wealth” of millionaires turns out on examination to be virtual … and to consist mostly of claims to wealth.’31 Adam Smith would have agreed. ‘Real wealth,’ wrote Smith, derives from ‘the annual produce of the land and labour of the society’.32 By this light, much millennial wealth wasn’t real at all, but mere claims to wealth whose market value multiplied as the discount rate declined.
• Nog wat cijfers over de financiëlisering van de economie (slechts één op tien Amerikanen werkt nog in de industrie)
  After the turn of the millennium, millions of blue-collar jobs were killed off by Chinese imports. Container ships leaving the Port of Los Angeles crossed the Pacific laden, not with American exports, but with garbage to be dumped in the Far East. By 2008, just one in ten US workers was employed in industry. The US economy was slowly financialized. Before the financial crisis most newly created jobs were in construction or services, such as banking, that benefited from the real estate and credit boom. The output of the finance, insurance and real estate sectors (FIRE) rose to be 50 per cent larger than manufacturing. The country possessed more estate agents than farmers.
• Financialisering versnelde nog NA de financiële crisis:
  The global financial crisis didn’t kill off financialization but rather accelerated it. In the aftermath of Lehman’s bankruptcy, finance contributed an even larger share of US economic growth than before.39 As we have seen, ultra-low interest rates facilitated corporate mergers and borrowing, thereby boosting Wall Street’s income. Inflated asset prices raised the incomes of hedge fund managers and other asset managers.40 Rather than investing in real assets, companies used debt to buy back their shares. The finance sector’s share of the economic pie grew to roughly three times its historic average. As one commentator observed: ‘We’ve substituted finance for industry as the locomotive of economic growth. In GDP terms, it looks terrific. But it is neither enduring nor real.’
• De toenemende winsten waren enkel het gevolg van de lage rentevoeten:
  After 2008, even as factories lay idle and unemployment stayed high, profits rebounded in the United States. Between 2010 and 2014, total profits (as share of US GDP) were around 40 per cent above their post-war average. The most important contributor to rising profitability was the steep decline in corporate borrowing costs. ‘The single largest input to higher [profit] margins … is likely to be the existence of much lower real interest rates since 1997,’ concluded the Boston money manager Jeremy Grantham. Had interest rates remained at normal levels, profits would have been average.fn3 Another study suggested that the policy of ‘maintaining overall production (GDP) while lowering both labor and capital costs has inflated a profits bubble’.42 Much of those profits derived from the financial sector. After 2010, financial services accounted for more than 20 per cent of total US profits, around twice the post-war average.
• Eén persoon die waarschuwde voor een nieuwe bubbel was.....Donald Trump:
  None of these stabilizing conditions held in 2016. Later that year, Donald Trump accused the Federal Reserve of creating a ‘false economy’ and inflating a ‘big, fat, ugly bubble’.44 Trump added: ‘The only thing that is strong is the artificial stock market.’ It was incongruous for a New York property developer, whose fortune depended on elevated property prices and cheap finance, to express such thoughts; but, in essence, the future US president was correct. The Fed’s extreme policy measures had ended the Great Recession but at the cost of creating a ‘false economy’.
  Households were richer than ever, but much of their wealth consisted of financial claims unsupported by income-producing capital. Virtual wealth. Profits were increasingly detached from real economic activities. A profits bubble. The financial sector was crowding out the real economy. A bubble economy.
• Rente bepaalt de keuze tussen nu consumeren of later (sparen) en wanneer ze lager is dan dan de time preference gaan mensen nu meer consumeren wat leidt tot meer lenen en toenemende schulden. Wanneer dit structureel wordt ontstaan er grote problemen:
  This delicate balance is upset when the market rate of interest falls below society’s ‘crystallized impatience’. When the interest rate is higher than an individual’s time preference, he or she will save more for the future. Conversely, when the market rate is below the public’s time preference people borrow to consume. An abnormally low rate of interest boosts current spending, but the benefits don’t last. You cannot have your cake and eat it, at least not indefinitely. Cake is not the only item on the menu. People have a choice: jam today or more jam tomorrow. The rate of interest influences their decision.
  The notion of interest as the wage of abstinence found no favour with the legions of economists at the Federal Reserve. America’s central bank embarked on its easy money policy at the turn of the century without duly considering the impact on the country’s savers. Americans were encouraged to borrow and spend as if there were no tomorrow. Thanks to the buoyant housing market, homeowners got richer without experiencing the pain of abstinence. At the peak of the housing bubble, the US personal savings rate had fallen to just a third of its level a decade earlier.7 As Americans saved less, they borrowed more from the future. Household debt soared as homeowners extracted trillions of dollars through home equity loans. Personal consumption hit a record high.8 The United States sported the largest current account deficit in its history – a signal that the country was spending far more than it earned.9 While Ben Bernanke at the Fed warned of a global ‘savings glut’, the United States was suffering a dearth of domestic savings. After the housing bubble burst, consumers found themselves saddled with too much debt. The United States appeared to be on the brink of a ‘balance sheet recession’, the name given to economic contractions that occur when overstretched borrowers cut spending to pay off their debts. Whereas Japan’s balance sheet recession of the 1990s saw companies reduce their leverage, now it was the turn of US households to tighten their belts.
  This is clearly the case for bond investors. When long-term interest rates decline, investors experience a windfall gain as bond prices increase. But since the bond’s coupon is fixed, investors who hold the security until it matures are no better off. In fact, bondholders as a class suffer when long-term rates decline since they must reinvest their coupons at lower yields. Stock market investors are in a similar position. Over the long run, equity returns are inversely correlated with the market’s valuation. As with bonds, elevated stock prices imply lower future returns. In the United States, a balanced portfolio comprising of stocks and bonds has historically returned around 5 per cent after inflation.30 Ten years after the financial crisis, with the valuation of the US stock market at close to a record high and the yield on Treasuries near an all-time low, the expected return on a balanced investment portfolio was around half its historic average.31 There was no getting away from it, American households would have to save more if they wanted to enjoy the same level of retirement income as earlier generations.
• We hebben dus een economie vol met papieren welvaart en dat is niet de schuld van de "vrije markt". Sparen creëert kapitaal dat nodig is voor een productieve en dus reële welvarende economie. Maar gespaard werd er niet meer.
  Lord King was right, but the market economy itself was hardly to blame. As we have argued, it is interest that connects the present and the future; with interest rates set by central banks at the lowest level in history that link was effectively broken. Record levels of paper wealth encouraged households to carry on spending. But the illusion of wealth was inherently fragile. Monetary policymakers could only conjure up further capital gains by pushing interest rates ever lower. Any attempt to normalize rates would threaten the wealth bubble, bringing about a massive loss of household wealth. In the short run, ultra-low interest rates boosted consumption by substituting bubble wealth for savings, but in the long run it was a disaster. Savings are needed for the accumulation of capital. Societies that don’t invest enough are doomed to stagnate. More than a century earlier, Gustav Cassel had anticipated that a rate of interest of 1 per cent or less would create ‘a revolution in … the total supply of waiting [i.e., savings]’.35 He was right. Ultra-low interest rates have produced this unwelcome revolution. Even Keynes, the avowed enemy of the rentier class and a tireless advocate for easy money, thought it unwise to reduce the rate of interest below 3 per cent. It was ‘socially desirable’, said Keynes, that savers should receive a positive return on their capital.36 As the Chairman of a life insurance company and Bursar of his Cambridge college, he spoke from a position of authority.
• Maar dat vereist hogere rentevoeten, zodat sparen iets opbrengt. Maar is interest niet hetzelfde als woeker?
  But the extent to which interest aggravates inequality depends on the nature of the economic system and on the identity of borrowers and lenders. In traditional societies, usury is often practised on those in desperate need, such as peasant farmers. But taking interest in a modern capitalist economy isn’t always unfair.
  Marx may have excoriated usury in the ancient world, but he also understood that interest in a capitalist world was different. Interest under capitalism, he said, should be viewed as a division of the economic surplus between lenders (whom he called ‘money capitalists’) and borrowers (‘industrial capitalists’). A decline in interest rates didn’t necessarily benefit workers, Marx wrote, since ‘interest is a relationship between two capitalists, not between capitalist and labourer.’
  Irving Fisher denied that there existed any clear division between capitalists, workers, landlords and entrepreneurs. As borrowers and lenders, these different classes overlapped and the incomes of each were affected by interest.7 Nor is it the case that lenders are invariably richer than borrowers. In the modern world, many less well-off families have bank deposits and insurance policies while the rich are often heavily in debt.8 As Locke pointed out in the seventeenth century, ‘widows and orphans’ suffer when interest rates decline. Since the less well-off are forced to keep a greater share of their wealth in cash to meet emergencies, they suffer a disproportionate loss of deposit income when interest rates decline.9 Since Josiah Child’s day, the business world has always advocated for easy money – as Child’s contemporary Daniel Defoe wrote, the ‘interest of money is a canker-worm upon the tradesman’s profit.’ There is another class involved in the fight over interest. Investment bankers and other financiers are often large borrowers. The financial world is divided between mighty borrowers and powerless lenders, great whales feed off the savings plankton. As Justice Brandeis observed, Wall Street uses other people’s money, and the less it pays for this use the greater its profits.
• Kortom, grote fortuinen worden opgebouwd tijdens perioden van abnormaal LAGE rentevoeten niet HOGE. Investeringsbanken edm. zijn vooral grote schuldeNAARS. 
  It is no coincidence that the greatest fortunes have been gained during periods of abnormally low interest rates. In late sixteenth-century Europe, the entire wealth of Augsburg, a free city of the Holy Roman Empire, was concentrated in a few hands, mainly in those of the banker Jakob Fugger. The ‘astonishing feature’ of this era was ‘the lowness of the discount rates’.11 Fugger, described in a recent biography as ‘the richest man who ever lived’, earned his fortune by borrowing at rates of interest as low as 2 per cent, and lending the money onwards, mostly to Habsburg emperors, at 10 per cent or more.12 The magic of compound interest over more than three decades made Fugger, in the words of his epitaph, ‘second to none in the acquisition of extraordinary wealth’. At the height of his fortune in 1720, John Law considered himself to be the richest person in history. As we have seen, the Scotsman’s wealth peaked at a time when interest rates in France had fallen to 2 per cent while shares in his Mississippi Company traded at fifty times earnings (a 2 per cent earnings yield). John D. Rockefeller has an even better claim than Law to be considered the wealthiest man in history. The fortunes of the robber barons, such as Rockefeller, were amassed in the late nineteenth century when falling interest rates boosted the ratio of American wealth to incomes.13 Prior to the Great War, the Standard Oil boss was worth 2.6 million times the average annual working American’s wage.14 When the banker Pierpont Morgan died in 1913, leaving an estate valued at $80 million, Rockefeller commented: ‘and to think he wasn’t even a rich man.’15 A little more than a century later, Amazon’s founder Jeff Bezos outdid the mighty Rockefeller with a fortune estimated at more than $200 billion – some 3.5 million times the average American’s income at the time.16 On the day the internet tycoon achieved this milestone, the Fed funds rate was firmly stuck at zero. Boosted by the low prevailing discount rate, Amazon shares traded on a price-earnings ratio above 100 times, more than twice the peak valuation of Law’s Mississippi Company.
• En dus leiden financialisatie en lage rentevoeten tot HOGERE inkomens- en welvaartsongelijkheid, met deze toenemende welvaart geconcentreerd in de 0,001%:
  As we have seen, the continuous decline in interest rates towards the end of the nineteenth century drove the ‘Morganization’ of American industry, earning vast fortunes for Wall Street bankers. Over the course of the nineteenth century the richest Americans greatly increased their share of wealth, with gains concentrated at the very top of the pyramid.
  The connection between financialization and inequality resurfaced in the 1920s. As the US financial sector expanded over the course of the decade, an increasing share of income derived from capital gains, realized from the booming stock market. A mere tenth of Americans grabbed more than half of total income – a level not seen again until the end of the century.19 Wealth inequality also increased, with the top percentile taking the lion’s share of the gains.20 The Hamptons sprouted palatial new residences, while  ‘the whole upper tenth of a nation [was] living with the insouciance of grand ducs and the casualness of chorus girls’, to quote F.
  Economists at the Bank of England suggested that rising inequality forced poorer households to save more and discouraged business investment.34 (In fact, as we have seen, American and British households on average saved less than in the past.) Some commentators maintain that rising inequality was responsible for the decline in interest rates. According to economics blogger Steve Waldman, ‘The behavior of real interest rates is the empirical fingerprint of the effect of inequality on demand … growing inequality required ever greater inducement of ever less solvent households to borrow in order to sustain adequate demand, and central banks delivered.’35 This may be so. But the relationship between inequality and interest rates runs in both directions. As we have seen, inequality in the United States only took off after interest rates started to fall in the 1980s. In the wake of the Dotcom bust, easy money inflated a wealth bubble, and the wealth bubble exacerbated inequality. The rise in inequality, in turn, lowered the economy’s growth prospects, and as the economy stagnated, so did workers’ incomes. In other words, low rates begot inequality and inequality begot lower rates.
• Overal bubbles (en niet de armen profiteren):
  A student debt ‘bubble’ formed, encouraged by low interest rates and government guarantees. From the early 1980s onwards more young people went to college, enticed by the higher incomes earned by graduates. But as the supply of college-educated workers increased, the premium income commanded by those with degrees decreased. Many couldn’t find work to match their educational level – a case of ‘elite overproduction’.fn7 In 2017, the New York Fed reported that 40 per cent of newly minted graduates were underemployed.92 Ten years after the financial crisis, student debt in the United States exceeded $1.5 trillion.93 Despite a strong jobs market, nearly a quarter of federal student loans were in default.94 During the real estate bust, young American homeowners suffered a disproportionate loss of wealth.95 The recovery of the housing market brought fresh problems for the younger generation. As homes prices climbed faster than incomes, many found themselves locked out of the property market at a time when developers focused on building luxury properties and more properties were being sold to financial investors.96 In the United States, Europe and Australia, the homeownership rate was stagnant or plummeting.97 By 2018, the average age of US housebuyers had reached forty-six years, the oldest on record.
  In the United Kingdom, ‘Generation Rent’ arose.99 Despite low mortgage costs, most first-time buyers couldn’t scrape together a deposit. Many were assisted by a new financial institution, known as the ‘Bank of Mum and Dad’. Homeownership was fast becoming a preserve of the professional classes.100 The British government offered a subsidy to first-time buyers in 2013, but this subsidy pushed up house prices even further.101 Politicians promised to build more homes, but the number of new houses needed to make housing affordable again was inconceivably large. Economists at the University of Reading came up with an alternative, summarized in a Bloomberg headline: ‘The Only Solution to Britain’s Housing Crisis May be a Crash’.102 Britain’s housing affordability crisis had damaging economic consequences. A dynamic economy requires that workers move freely between jobs. But as house prices climbed, there was a steep drop in the number of Britons moving home to start a new job.103 Young homeowners who took out large mortgages to buy a house had less money to spend on other things. Resources were diverted into building luxury apartments, which did nothing to improve housing affordability. As the cost of doing business climbed and inward migration declined, metropolitan areas were turning into ‘closed-access’ cities. In San Francisco low-paid workers were forced to sleep in cars.104 London and New York bore an uncanny resemblance to eighteenth-century Venice, decadent resorts for a cosmopolitan elite.
• En dit alles (hoge huizenprijzen, hoge schulden voor studenten en lage inkomensgroei) leidde tot lagere geboortecijfers (ahum) en hogere sterfecijfers onder de arbeidersklasse (oa. wegens pijnstillers):
  While the rich got richer, the poor stopped having children. High levels of student debt, weak income growth and elevated house prices discouraged young couples from starting a family. In the United Kingdom, the birth rate and housing market were inversely related: as house prices went up, the number of births fell.105 In parts of Europe worst affected by the sovereign debt crisis, a similar demographic dampening was observed. Spain’s population dipped in 2012 for the first time on record. Life expectancy in the United States declined in 2015.106 Economists Anne Case and Angus Deaton pointed to ‘Deaths of Despair’ among white working-class Americans, tens of thousands of whom were killing themselves with prescription painkillers.107 In the age of secular stagnation, opioids were the opium of the people.
• Bewijzen voor toenemende inkomensongelijkheid als gevolg van QE:
  It is clear that unconventional monetary policies unleashed by the financial crisis had a profound impact on inequality. A Bank of England study (from 2012) estimated that quantitative easing boosted UK household wealth by more than £600 billion. As the top decile of households owned more than two-thirds of private assets, they benefited disproportionately.113 Another study of UK monetary policy concluded that ‘one of the side effects of QE in particular has been to exacerbate the already widening income and wealth disparity between [the] richest and poorest sections of the society.’114 The same held true in the United States, where inequality in income and wealth became more extreme than at any time since the 1920s.
• En het leidt tot dubbele standaarden:
  It is not hard to discern a double standard in the policymakers’ approach. Banks with busted credit got bailed out, while homeowners with busted credit got foreclosed. Wall Street received zero-cost loans from the Fed, while millions of households paid triple-digit annual percentage rates (APRs) on loans from payday lenders, pawnbrokers and title-lenders. A decade after the financial crisis, credit-card charges remained at roughly the same level as at the turn of the century.117 As analyst Jamie Lee writes: Need determines yields. Less creditworthy means more needy. The wealthiest homeowners pay the lowest mortgage rates … There are two ways to interpret this relationship. The first is to consider that the neediest borrowers are also the riskiest … The second is to consider that the neediest borrowers can be squeezed the hardest.118 Just as Bastiat predicted, the poor didn’t benefit from easy money. In the age of zero interest, old-fashioned usury was alive and well.
• Over Pikkety:
  On closer inspection, Piketty’s ‘capital in the twenty-first century’ turns out to be our old acquaintance, the wealth bubble.† As we have seen, from the mid-1990s onwards the Fed’s monetary policies inflated a succession of wealth bubbles. Since wealth is unevenly distributed and top incomes are correlated with stock prices, these wealth bubbles were responsible for much of the increase in inequality. A central argument of this book is that wealth bubbles occur when the interest rate is held below its natural level. The natural or equilibrium level of interest can’t be directly observed, but it is indicated by the growth rate of the economy and the growth of its capital stock. Thus, inequality is liable to increase when the rate of interest is held below the economy’s growth rate. Our alternative ‘iron law of inequality’ can be annotated as r < g, with r signifying the rate of interest and g the economy’s trend growth. This formula, which is the inverse of Piketty’s, can explain both changes in the distribution of income and wealth during the 1920s and the rise in inequality since the 1980s and, in particular, the Great Immoderation of the post-Lehman decade.
• Over "carry trade"
  When short-term rates are low, investors have an incentive to take out loans to buy assets that yield more income. The difference between the cost of borrowing and the return on risky loans is known as the ‘carry’. There are numerous types of carry trades, from hedge funds using leverage to buy mortgage-backed securities to landlords taking out mortgages on their rental properties. The returns from carry trades are asymmetric: investors generally enjoy a steady stream of small gains but are exposed to sudden large losses. In market parlance, carry traders are said to pick up nickels in front of steamrollers. (More crudely, they are said to ‘eat like a bird, shit like an elephant’.)
• Heel rare dingen gebeuren in tijden van abnormaal lage rentevoeten:
  Duration even paid for owners of bonds with negative yields. Some $12 trillion-worth of bonds belonged to this category by the summer of 2016.23 ‘Yields don’t matter,’ declared a Tokyo insurance executive as the redemption yield on a thirty-year Japanese government bond turned negative.24 This comment was not as crazy as it may appear, since any loss of income experienced by bondholders was more than offset by the prospect of capital gains as interest rates declined. As Japan embraced negative rates, its government bonds were delivering their best returns in decades. The prospect of further rate cuts, as interest rates moved deeper into negative territory, only whetted appetites. Thus, it could be said (with a more or less straight face) that investors should buy negative-yielding bonds for capital gains and equities for income. Meanwhile, governments capitalized on this duration frenzy to lengthen the maturities on their loan books. ‘We are happy to feed the market with the product they want,’ declared the manager of France’s national debt.25 In 2015, both Ireland and Belgium issued bonds with 100-year maturities.26 A number of private companies, including German chemical firm Bayer and French utility EDF, also issued century bonds.27 Brazil’s scandal-ridden energy giant Petrobras found strong investor demand for bonds that promised to redeem into the twenty-second century. Italy, perennially on the verge of a sovereign debt crisis, launched a fifty-year bond yielding less than 3 per cent that was heavily oversubscribed. At the time, the yield on Italian short-term bonds was printed with a minus sign. Duration may be profitable during a bond bull market, but it is also a risk factor. When interest rates rise, bondholders who own long-dated securities suffer most. As duration lengthened and the size of the global bond market expanded after 2008, the total loss exposure for fixed-income investors climbed inexorably. With trillions of dollars’ worth of bonds trading at negative yields, bondholders faced huge losses if interest rates were to rise unexpectedly. According to Goldman Sachs, the aggregate duration of corporate bonds around the world doubled between 2006 and 2016. By the latter date, Bloomberg estimated that a mere half a percentage point rate increase would generate $1.6 trillion of losses in the fixed-income markets.28 A dislocation in the bond markets posed a potential threat to the market for financial derivatives, those financial weapons of mass destruction, as Warren Buffett called them, whose nominal exposure was measured in the quadrillions (thousand million million) of dollars, most of which were tied to interest-rate contracts.
• Fiat geld, fiat regulering:
  The upshot of the global financial crisis was indeed a great deal more regulation. The rules of the 2010 Dodd–Frank Act ran to tens of thousands of pages. As the Bank of England chief economist Andrew Haldane commented: ‘Dodd–Frank makes Glass–Steagall [the landmark Depression-era regulatory Act, totalling just 37 pages] look like throat-clearing,’ while Europe’s planned new regulations were reckoned to be twice as long as Dodd–Frank’s.55 International banking rules, set by the Basel Committee, also increased exponentially, from Basel I (1988) at 30 pages to Basel III (2011) at 616 pages. ‘[C]entral banks are printing rules almost as fast as they’re printing money,’ quipped James Grant. More regulations meant more regulators. Once upon a time, the City of London had been ruled by a raised eyebrow from the Governor of the Bank of England.fn9 Even in the late 1970s, the Old Lady of Threadneedle Street employed fewer than eighty regulators – one for every 11,000 City workers. After the 2008 crisis, the ratio of UK financial regulators to finance employees fell to 1:300. A similar proliferation of regulatory box-tickers occurred in the United States. Large US banks hired thousands of compliance officers at a cost of tens of billions of dollars to keep up with the growing thicket of financial red tape.
• In tegenstelling tot alle beloftes bleven rentevoeten voor een onvoorstelbare lange periode veel te laag:
  In the summer of 2009, Ben Bernanke penned an op-ed for the Wall Street Journal promising that the Fed would withdraw its emergency monetary measures in a ‘smooth and timely manner’. It was not to be. As long as Bernanke remained in charge of America’s central bank, the Feds fund rate didn’t budge. While Greenspan’s easy money (a 1 per cent rate) lasted for just twelve months, for seven years after the financial crisis the Fed funds rate remained at or close to zero. Nor did the Fed’s balance sheet ever contract on Bernanke’s watch. In fact, between the date of Bernanke’s Wall Street Journal commentary and his departure from the post, the Fed’s balance sheet grew by around $4 trillion.
• Economen in la-la-land:
  After leaving Buenos Aires, the monetary radical returned to Germany where he set up a vegetarian commune. In 1916, he published a book, The Natural Economic Order, calling for rent-free land and interest-free money, which was dedicated to the American radical economist Henry George, Moses and the Roman slave leader Spartacus. The following year, Gesell wrote to Lenin advising the Bolshevik leader that he should take control of the monetary sector rather than attempt to plan the real economy. A few years later, he served as Finance Minister in the short-lived Bavarian Soviet Republic (whose government’s most notable achievement was to declare war on Switzerland for refusing to lend some steam engines). His Free Economy organization attracted thousands of followers in the 1920s. Shortly after Gesell’s death in 1930, a small-scale experiment with rusting money (Schwundgeld) took place in Austria. The failure in May 1931 of the Creditanstalt bank pushed the Austrian economy into a severe depression. The councillors of Wörgl, a small town in the Tyrol, decided to combat local unemployment with a public works programme. Their Gesellian brainwave was to finance their outlays by printing their own currency. To remain valid Wörgl’s notes had to be stamped monthly, with the cost of the stamp set at 1 per cent of face value. According to one contemporary account, the scheme was successful at reducing unemployment – at least until the Austrian National Bank, resentful of the encroachment on its money monopoly, brought Wörgl’s currency adventures to an end.20 The story does not end there. At Yale, Irving Fisher caught wind of Wörgl’s scheme. Fisher shared Gesell’s view that hoarding money exacerbated depressions. He wrote to the Mayor of New Haven, proposing an ‘emergency self-liquidating stamp-tax relief scrip’ to facilitate employment, and later petitioned President Roosevelt with a similar scheme. (Fisher fixed the annual rate of depreciation for his scrip at 26 per cent.) America’s greatest economist was rebuffed.21 Keynes later saluted Gesell in his General Theory as a ‘strange, unduly neglected prophet’. Gesell might have remained a footnote in the history of economic thought had it not been for the Great Recession.
  Negative interest rates were intended, as Harvard’s Kenneth Rogoff put it, to ‘turbocharge the economy out of a deflationary recession’.23 But they failed to live up to this promise. In fact, they exacerbated the problems already produced by ultra-low rates. From the outset, negative rates created a tremendous challenge for conventional banks. When they were introduced into Europe, the head of Portugal’s central bank viewed them as a threat to the financial system.24 European banks felt unable to pass on the cost to depositors. German banks suffered huge losses, which they compensated for by taking more risk.25 The solvency problems at European life insurers and pension funds deteriorated.26 Liquidity in the bond markets dried up. The repo market likewise suffered.27 Real estate bubbles inflated in Switzerland and Sweden.28 Negative rates failed to turbocharge investment.29 Danish investment actually declined in the years after they were introduced.30 One explanation was that monetary policy was sustaining overcapacity in the global shipping industry, in which the Danes were important players.31 It was also suggested, not implausibly, that negative rates undermined business confidence by creating the impression of a never-ending crisis.fn11 The negative-interest-rate policy even failed in its primary purpose, namely bringing inflation back up to target. Four years after the Danish policy rate turned negative in 2012, inflation hovered at around 1 per cent. Not only did negative interest rates hinder banks from creating money, but the policy itself was said to induce a deflationary mindset.32 Rather than discouraging hoarding – the original purpose of Gesell’s ‘rusting money’ proposal – negative rates had the opposite effect. One of Germany’s largest banks, Commerzbank, announced that it would consider stashing cash in its vaults to avoid the ECB’s tax on deposits. In Japan, sales of safes took off after negative rates were introduced.33 These responses should have been anticipated. Keynes was vindicated: interest really was necessary to stop people from hoarding capital.
  Up to this moment, the notion that interest could be charged at a negative rate had only been proposed by monetary cranks, such as Gesell, or contemplated as a thought experiment by a handful of economists. The economists’ verdict was not positive. Even Gesell’s hero, the nineteenth-century radical Henry George, thought that capital could not be maintained if interest rates fell below zero.44 George’s contemporary Eugen von Böhm-Bawerk believed that negative interest rates were against human nature. The great Swedish economist Gustav Cassel, author of The Nature and Necessity of Interest, dismissed the ‘absolute absurdity of thinking’ that the rate of interest could ever fall to zero or less.45 The invitation to waste capital, Cassel said, would be overwhelming. Although Irving Fisher supported Gesell’s proposal in the Great Depression, he believed that zero or negative interest was ‘practically almost impossible’. Negative interest, said Fisher, could only work if money was turned into a ‘perishable commodity, like fruit’.
• Brazilië en China: dezelfde fenomenen zie je ook daar:
  Brazil was not the only emerging market to face an epic corruption scandal. In late 2015, it was discovered that billions of dollars had gone missing from Malaysia’s development fund, 1MDB – of which a large chunk reportedly ended up in the bank accounts of the country’s Prime Minister, Najib Razak. Much of the stolen money found its way to the United States, where it was spent on works of art, fancy yachts and luxury properties. Malaysia’s missing funds also financed Martin Scorsese’s film The Wolf of Wall Street, which, given the involvement of Goldman Sachs in raising money for 1MDB, was most fitting. Thus, carry-trade dollars that left the United States in search of higher returns abroad returned home, laundered via off-shore financial centres – in Switzerland, the Seychelles, British Virgin Islands, Cayman Islands, Panama and elsewhere. The grand theft at Malaysia’s development fund was replicated in less newsworthy fashion by countless emerging-market kleptocrats, their ill-gotten fortunes recycled into prime properties in London, Miami, New York, Sydney and other welcoming destinations.
  Claudio Borio provides an alternative view to the conventional wisdom on Chinese savings. Most people look upon savings as a ‘real’ phenomenon; that’s to say, they assume that savings arise when individuals voluntarily refrain from consuming their income. But this isn’t how things work in the real world, says Borio. In the real world, banks create credit out of thin air. Savings and investment are two sides of the same coin. Thus, when a bank loan is used for the purposes of investment there occurs an automatic increase in reported savings.27 In China, financial repression stimulated credit growth; much of the new credit was invested, which, in turn, pushed up the savings rate.
  China’s financial repression came in the form of unstable bubbles, uncoordinated investment, unsustainable debt, and an unbalanced shadow banking system, and it also allowed unscrupulous vested interests, including members of Premier Wen’s own family, to reap the benefits from the limitless flow of easy money.
  China overtook the United States to become the world’s largest property market by value.42 At which point, the authorities decided to cool the housing market. Interest rates and bank capital requirements were hiked in early 2010 and mortgage standards tightened. Banks were instructed to stop lending for third-home purchases.43 It took a while for these measures to bite, but towards the end of 2011 property prices were falling in nearly all of the seventy cities tracked by the National Bureau of Statistics. House sales crashed in Shanghai and Beijing. Whereupon policy was reversed again. In the summer of 2012, interest rates were cut as part of a ‘global coordinated global easing campaign’ (according to Bloomberg) linked to Europe’s sovereign debt crisis.
  As in Europe, China’s economy became infested with corporate zombies, nourished on a diet of cheap credit, state subsidies and loan forbearance. In January 2016 the People’s Daily carried an interview with an ‘authoritative person’, believed to be President Xi’s chief economic adviser, Liu He, who called for a reduction in industrial overcapacity.69 Premier Li Keqiang reinforced this message, declaring that ‘For those “zombie enterprises” with absolute overcapacity, we must ruthlessly bring down the knife.’70 A number of supply-side reforms were announced and two loss-making state-owned steelmakers – Baosteel and Wuhan Steel – were merged.71 Yet only a few months after the Premier’s comments, US steelmakers complained that Chinese competitors were being kept alive with state subsidies and dumping their surplus steel in the United States.72 The IMF identified some 3,500 state-owned zombies across eleven Chinese provinces.
  Capital was misallocated in China on a scale not seen since the heyday of the Soviet Union. Soviet central planners had also operated under conditions of financial repression. In his Political Economy of Socialism, Hungarian economist János Kornai explained how monetary conditions in Communist Russia and its satellites contributed to their economic failure: [M]arket coordination had not become predominant in these economies. If the real interest rate is negative for a long period, it is unable to control the allocation of investments and gives false information to decision makers for all the decisions that compare present and future revenues and expenditures.78 In 1994, Paul Krugman published a celebrated essay in Foreign Affairs entitled ‘The ‘Myth of Asia’s Miracle’. Krugman observed that ‘Rapid Soviet economic growth [in the 1950s] was based entirely on one attribute: the willingness to save, to sacrifice current consumption for the sake of future production.’79 At a time when the World Bank was hailing an ‘East Asian Economic Miracle’, Krugman pointed out that most Asian economies, like Khrushchev’s Russia, needed ever-increasing investment inputs in order to grow. What Krugman didn’t say was that several Asian economies had pegged their currencies to the US dollar and were funding investment with cheap foreign loans. Not long after this article appeared, the Asian crisis broke.
  Although they borrowed more cheaply than private firms, state-owned enterprises nevertheless had trouble covering their interest costs.fn11 After 2012 the total cost of debt-servicing exceeded China’s economic growth.87 An economy that can’t grow faster than its interest costs is said to have entered a ‘debt trap’. China avoided the immediate consequences of the debt trap by concealing bad debts. What’s been called ‘Red Capitalism’ resembled a shell game in which non-performing loans were passed from one state-connected player to another.
  China’s bezzle was inversely related to the interest rate: as rates went down, the bezzle went up.fn14 Corruption was concentrated in those sectors, such as real estate, mining and construction, that benefited most from easy money. Investment projects were selected according to the size of extractable rents.127 Officials in charge of distributing credit made unauthorized loans and skimmed off interest.128 Networks of corruption were sustained by bribes paid in cash, land, property and shares, and by gifts and lavish entertainments. Officials on VIP junkets at Macau casinos laundered bribes while sating their passion for baccarat.129 The prices achieved from the illicit sale of public offices (i.e., the capitalized value of rents) took off.130 As paper wealth expanded, the Party cadres milked the asset economy and crushed political opposition.
• Dit falend systeem kan enkel worden rechtgehouden met "digitale munten" van centrale banken, een idee ontstaan in uiteraard China. Maar willen we dit systeem rechthouden? (Sommige economen natuurlijk weer wel)
  Rogoff envisaged a day when all cash would be digitized and every citizen had a bank account with the central bank. A few years later, central banks started to examine the issue of digital currencies – money issued by central banks without any physical manifestation. Needless to say, this idea originated in authoritarian China. ‘Money,’ wrote Friedrich Hayek, ‘is one of the greatest instruments of freedom ever invented by man.’26 As Dostoyevsky put it, ‘money is coined liberty.’27 Cash allows people to make transactions discreetly, even if that discretion is sometimes abused. It’s true that financial payments by cheque, card and electronic transfer already account for most transactions. But a cashless world would destroy the last vestiges of privacy, creating a ‘digital panopticon’ overseen by a single watchman, in this case the central bank (and, no doubt, intelligence agencies too), surveying all, judging whether transactions met some arbitrary notion of the public good.28 Since this threat to individual privacy and liberty was not comprehended by the monetary policymakers’ model, it could safely be ignored.