22 July 2020

The Price of Capital Has Never Been Lower - and what that means for policy

Prices are a simple but effective signal that simply say, "This is cheap! Use it abundantly!" or "This is expensive! Use it sparingly!" 

The price of capital is the interest rate and interest rates are at their lowest in the history of the country. The market message is "Use capital abundantly!"

How? Well, with unemployment at its highest levels since the Great Depression, use it for infrastructure projects and developing new technologies like green energy and subsidizing valuable services like childcare and elder care. In the private and public sector, use an abundance of capital to fund entrepreneurship and innovation.

Capital is abundant and cheap, Great jobs, financial independence and better technology are scarce and expensive. If we use capital right - treating it as abundant - we can eventually create an abundance of the things that are currently still scarce and expensive, transforming them just as we have capital over the last century or so. 

That's the stuff of progress.


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