tag:blogger.com,1999:blog-11906042.post3098286191900581202..comments2024-03-29T10:51:27.752+13:00Comments on Not PC: “A falling interest rate is deadly poison to business.”Peter Cresswellhttp://www.blogger.com/profile/10699845031503699181noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-11906042.post-27022925270379014072014-03-25T16:11:50.583+13:002014-03-25T16:11:50.583+13:00This implies that the original loan is at a fixed ...This implies that the original loan is at a fixed rate. For business loans this is rarely the case. Therefore the falling rate would offer Sleepy more working capital, which would allow him to either undercut Hotpot, or refurbish his property. He could also just bank the higher net profit margin and get his debt down.<br /><br />Also, while I accept the concept of churn, as a consumer I now have the choice of 2 eateries. Since there is more competition prices may come down, and quality up: a good thing for me. Incremental employment gains together with additional rental income to a commercial landlord would mean that the knock on effect of the lower interest rate is actually very big. And no, it is not an example of the broken window fallacy. <br /><br />If we accept churn as being only destructive, then the ideal business model is always a monopoly, which is ridiculous.<br /><br />None of this is a defense for a central bank to artificially lower interest rates, of course. But lower rates, per se, are not "deadly poison", but rather quite the opposite. Dolfnoreply@blogger.com