Dirk Ehnts: Low Interest Rates a Form of Bank Subsidy

January 26th, 2011
in econ_news

money clip art Econintersect:  University of Oldenberg (Germany) economist Dirk Ehnts says banks are still playing the same game:  “As long as the music is playing, you’ve got to get up and dance,” attributed to Citigroup CEO Chuck Prince in 2007.  Addressing a recent debate between nobel laureate Paul Krugman and Alex Leijonhufvud, Professor of Monetary Theory and Policy at the University of Trento, Italy, Ehnts says both men have good arguments.

Follow up:

At the end of his discussion, Ehnts clearly favors the conclusions of Leijonhufvold which support the argument that, since bankers always try to profit from interest rate spreads, artificially low interest rates  constitute a form of banker subsidy or backdoor bailout.  However, cautions Ehnts, you can only dance until you drop.  

Source:  GEI Opinion

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