How Cheap Credit Distorts Money with Joe Consorti - WBD572

Joe Consorti is a Market Analyst at The Bitcoin Layer. In
this interview, we discuss Austrian economics, Credit Suisse
& the risk of large scale defaults, price distortions and
how Bitcoin fixes this.


- - - -


When faced with economic turmoil, central banks have a few
tools they can turn to, one of which is interest rates. Since
interest rates are the price to borrow money, and prices are
emergent, manipulating rates is an intentional distortion
analogous to fixing prices. Rates instead should be a factor
of the supply and demand of credit, risk of default, and a
reflection of opportunity cost.


However, during the financial crisis in 2007/2008, the US
federal reserve had little option but to step in and
repeatedly cut rates. They did this in an attempt to prevent
complete collapse and to restart the credit-seized economy.
Rates went to basically zero (and even negative in some
countries), and since 2008, we have been in an era of cheap
credit.


Now, we are potentially in the midst of another financial
crisis. Countries across the globe are battling with
inflation issues for a raft of reasons, including supply-side
constraints, excessive money printing during covid, and war
in Europe causing energy shortages. To battle this, central
banks are raising rates in an attempt to regain control.


So does cheap access to credit really boost the economy and
stimulate growth, or has it prolonged an artificial bull
market in equities, over-financialised assets, incentivised
mal-investment, added to the growing wealth divide and played
a key role in near double-digit inflation?