The monetarists still don't get it! You can't force banks to lend and you certainly can't force investors to borrow - not at any price.
When people feel optimistic about the future banks lend more and people borrow more. And when people feel pessimistic about the future they borrow less and banks are less inclined to lend (ie. take on risk).
This passage from that article makes a key point;
"When the government/central bank tampers with interest rates, savings and lending are distorted, and resources are misallocated.
This is evident in looking back on the housing bubble. The artificially low interest rates signaled that there was a high amount of savings. But it was a false signal.
There was also a signal for people to borrow more. Again, it was a false signal.
As these false signals were revealed, the housing boom turned into a bust."
Over recent years, especially recent months, we've seen the exact same distortion in markets with a major misallocation of investment into risk assets (high yield bonds and stocks). When the boom in risk assets turns into a bust the next more severe phase of deflation will see central bankers exposed as impotent.
