The UK has consistently high interest rates. Because business and other organisations use the rate of return on capital to determine investment decisions, this means that they require a fast pay-back for any money they invest - much more than the interest rate (in my experience a multiple of it).
The UK has persistently failed to invest in projects such as railway electrification that would improve the environment. For instance, electrification of the East Coast Railway Line was first mooted before 1923, but not completed until 1990. The UKs record in capital investment, reflected by its comparative economic decelin in the twentieth century, is much worse than other developed nations. Is this due to high interest rates?
If we are serious about global economy, should we fix interest rates at a nominal level and rgulate the economy by other means?
I am not wanting to make suggestions through this question. I genuinely want to know what people think.
2006-12-13
05:12:14
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2 answers
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asked by
Philosophical Fred
4
in
Economics