• Adam Smith Institute

    Adam Smith Institute place holder
  • Philosophy & Logic

    Philosophy and Logic
  • Cambridge

    Cambridge
  • Children’s SF

    Children's Science Fiction
  • Enter your email address to follow this blog and receive notifications of new posts by email.

    Join 419 other followers

When governments promote risk-taking

It’s part of the Austrian School explanation of the financial crisis that easy money and loose credit by governments and central banks led people to make wrong decisions.  It sent false signals about future demand that caused mis-investment.

In addition, because money and credit were so cheap, people took risks with it.  On the ASI site I’m pointing to yet another consequence.  All those depressed interest rates prevented fund managers from making worthwhile returns on things like bonds.  They were forced into riskier asset classes because the artificially low interest rates denied them decent returns on the safer stuff they usually invested in.

So in addition to sending out false signals, governments also prodded them into taking more risks.  Bad policy, and look what happened.

Advertisements
%d bloggers like this: