Risk premiums determined in an unhampered market align the interests of savers and investors. When central banks interfere with this, trouble results. Thorsten Polleit explains: Central banks have thus not only artificially reduced interest rates by lowering credit costs, they have also artificially reduced risk premiums by (explicitly or implicitly) signaling to the financial markets that they are prepared to basically ‘do whatever it takes’ to prevent another meltdown as witnessed in 2008/2009. The consequence is that financial markets and economies depend on central bank action more than ever before. There is no easy way out of this situation. If … Continue reading Central Banks Are Hiding the True Price of Risk