Douglas Carswell's Blog

The economic consequences of experts

Interest rates should be cut to zero, according to expert economists at both the British Chambers of Commerce and the Ernst & Young Item Club.

Apparently even lower rates will mean oodles of cheap credit. Which will allow businesses to do more business. Shoppers to shop more. And - hey presto! - prosperity.

Alas, those calling for this rate reduction don't explain how lowering the price of credit will increase its supply. It won't.

Nor do they explain how lower rates might encourage less debt, and thus get us out of a debt-induced stupor. Low rates will instead encourage the accumulation of yet more debt.

Or how zero interest rates revived growth in Japan. They didn't.

But hey, economic experts have been calling for lower rates since the financial crisis struck in 2007/08. So why stop now, just because its not working?

Everyone knows we need lower rates, I keep being told. All the experts agree.

I can't help notice that a strong dose of lower rates has been the "expert" response to just about everything, since the 1987 stock market crash.

Perhaps that has been part of the problem? May be it is easy money that has caused over consumption, a giant asset price bubble and lots of malinvestment - which we mistook for growth? Perhaps you have to be an "expert" not to see it.....

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