End The Obsessionwith Interest

摘要

In standard economic theory, the interest rate has long been regarded as the most important variable. Whenever the economy slows, and asset prices fall, economists clamour for lower interest rates to encourage more spending, and the US Federal Reserve usually obliges. It has recently obliged again, lowering the bank rate to nearly zero. But sometimes, especially in times of crisis, it's the collateral a borrower needs to post (or what economists call leverage) that is far more important.rnShakespeare got this right 400 years ago. In The Merchant of Venice, when Shylock grants a loan to Antonio they negotiate not just the interest rate but a pound of flesh as collateral too. It is clear which Shakespeare thought was more important: nobody who sees the play ever remembers the interest rate, which was zero.