Re: Wolfensohn of the World Bank

["Harry Veeder" <veed0001@xxxxxxxxxxxxxxxx>]

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>From: "John Gelles" <jjgelles@xxxxxxxx>
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Wolfensohn of the  World Bank
>Date: Thu, Apr 15, 1999, 11:35 am

> Everything Wolfensohn said to the TV audience
> (and below to a symposium), about fighting poverty
> around the world, seemed very right to me -- except
> for one idea he offered on TV:  He thought there
> was nothing more Japan could do today, after
> reducing the cost of essential borrowing to a zero
> rate of interest, to end Asian stagnation quickly.


They could let such interest fall below zero.
ie. pay people to borrow money. This is reasonable by using a cost/benefit
analysis to understand the  borrower's and lender's points of view. Under
such circumstances, the borrow has their *own* borrowing costs ie. they feel
the cost of taking a loan exceeds the cost of not taking a loan. For the
lender the costs of not providing a loan exceeds the costs of providing a
loan.

Under "normal" positive interest the converse is true. The lender feels the
cost of providing a loan exceeds the cost of not providing loan. For the
borrower, the cost of not taking a loan exceeds the costs of taking a loan.


Harry Veeder