The policy of the Bernanke-Yellen Fed to whet investors’ appetite for risk by maintaining short-term interest rates at zero in order to pump up investment spending seems to be working quite well. Here is some anecdotal evidence as reported by a friend:
I tried tapping private banks for a business loan, for fun, last month, for a business that I “may consider” buying. Last week, I received 2 quick offers for 2M in financing...at prime plus 2.5!! I don’t even have 2014 tax returns for the business. My accountant . . . says the business’ profits are clearly over reported. Yet, still, I get the loan offers. The 2 independent bankers I met with liked my “character”. Sigh...are we back to the 2005 loan standards? Numbers no longer matter? There are absolutely no numbers to justify this loan. The rate, under 6% for a 10 year term, has gotten my attention. There is less than a 20% personal guarantee. . . . [H]ow can I not make a profit on a capital investment with those terms? The Kool aid is contagious, once you get a taste.
The heightened “appetite for risk” that the Fed and the establishment media have been blathering about as a new method for the salvation of the U.S. economy is far from it. Rather it is the same old cheap-money policy dressed up in new garb and, as Austrian business cycle theory demonstrates, what it stimulates among bankers, investors, and entrepreneurs is best described by the title of the classic hard rock album by Guns N’ Roses, Appetite for Destruction.
