It is even worse when monetary policy forces negative real interest rates for years. Then getting into debt is worthwhile, because in real terms you have to pay back less than you borrowed. Then real estate prices rise, driven by higher valuation ratios and, of course, cheaper mortgages. This inflates banks’ balance sheets and creates systemic risk in the financial system.
2023-05-03 16:43:21
#Monetary #policy #impasse