You Can’t Have Capitalism Without Capital

Policymakers believe that zero percent interest rates stimulate the economy but in reality this policy simply destroys capital.

The lifeblood of a capitalist economy is capital, the formation of which requires people to save. Therefore in order to revitalise our over-indebted economy we need to actively encourage and reward saving.

However by keeping interest rates well below the rate of inflation, policymakers not only discourage saving, they actually destroy the savings already in existence. We are therefore moving in precisely the wrong direction.

Instead of building savings that can be invested in productive capacity, we are destroying savings in a misguided effort to stimulate spending. Even if zero percent rates provide an economic boost in the short-term, they do so at the expense of a true long-term remedy. Ultimately you cannot have capitalism without capital.

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