Banks’ relationships with borrowers are more important economically than many people realize.
A story of unintended consequences in three parts.
The criticism that banker compensation encourages imprudent risk-taking has become conventional thinking among bank regulators, academic researchers, and the mainstream media.
When trying to significantly reduce the rate of inflation, banks must make announcements that gradually lower the expected inflation rate. But the reverse is true when combating deflation: in that case, banks must take an aggressive approach.