Rising Interest Rates

[Yojimbo]

My personal favorite economist is Mark Blythe. He says inflation is actually good for borrowers and bad for lenders, so central banks have created this inflation scare as a way to keep their profits from sinking.

https://www.jacobinmag.com/2015/02/germany-austerity-blyth-speech-spd/

Quote:But look beyond this, and there is a bigger issue for left parties to deal with, one that they unfortunately helped to create. Back in the 1970s, a period that now seems quite benign, corporate profits were very low, labor’s share of income was very high, and inflation was rising. We were told that this was unsustainable, and new institutions and policies were constructed to make sure that this particular mix of outcomes would never happen again.

In this regard we were singularly successful. Today, corporate profits have never been higher, labor’s share of national income has almost never been lower, and inflation has given way to deflation. So are we happier for this change?
What we have done over the past thirty years is to build a creditor’s paradise of positive real interest rates, low inflation, open markets, beaten-down unions, and a retreating state — all policed by unelected economic officials in central banks and other unelected institutions that have only one target: to keep such a creditor’s paradise going.
In such a world, why would you, the average worker, ever get a pay rise? Indeed, is it any wonder that inequality is everywhere an issue? In Europe this plays out at the national level, and at the international level of creditor countries (good) and debtor countries (bad), where the rights of the creditors must be protected and the mantra that “you must pay your debts” must be respected.
Yet even in terms of simple welfare economics, this is nonsense. If the cost of squeezing the debtor is to keep her in debt servitude, or if the losses to the creditors are less than the costs of servicing the debt in perpetuity, then default is efficient, if not moral.