Interesting comment and good points that I had not considered.
I guess there is a risk of the government simply taking control of the central bank whenever they want (assuming they don’t already have control from the start), and then set the interest rate to whatever they want (most likely something very low, so they can spend extra, perhaps during a war). However, to me it seems likely, that governments will have a harder time changing a fixed rate, than a dynamic one. Further, the currency’s value would likely drop abruptly if the government would decide to change the fixed rate, since then there is no guarantee what they will do with the currency. I’d love to hear your thoughts on this.
I wonder if having a decentralized currency might solve these issues, since the fixed rate would be “impossible” to tamper.
For your statement about boom/bust problems, I would argue that current systems with central banks is somewhat more likely to cause booms and busts, since what generally happens, is that interest rates are lowered, and leverage is increased, to the point it’s no longer sustainable, and there is a bust (like 1929). If the rate is fixed, the market should regulate itself, and be stable over time. Do you disagree with this being the case? If so, I would like to hear your reasoning.
Interesting comment and good points that I had not considered.
I guess there is a risk of the government simply taking control of the central bank whenever they want (assuming they don’t already have control from the start), and then set the interest rate to whatever they want (most likely something very low, so they can spend extra, perhaps during a war). However, to me it seems likely, that governments will have a harder time changing a fixed rate, than a dynamic one. Further, the currency’s value would likely drop abruptly if the government would decide to change the fixed rate, since then there is no guarantee what they will do with the currency. I’d love to hear your thoughts on this.
I wonder if having a decentralized currency might solve these issues, since the fixed rate would be “impossible” to tamper.
For your statement about boom/bust problems, I would argue that current systems with central banks is somewhat more likely to cause booms and busts, since what generally happens, is that interest rates are lowered, and leverage is increased, to the point it’s no longer sustainable, and there is a bust (like 1929). If the rate is fixed, the market should regulate itself, and be stable over time. Do you disagree with this being the case? If so, I would like to hear your reasoning.