Rising interest rates may lead to more victims

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Due to the rapidly rising interest rates, there may be more victims in the financial system. That says BNR’s house economist Han de Jong. According to De Jong, the central banks have generated liquidity for years and encouraged debt to be incurred due to the low interest rates. ‘And then in 2022 those central banks will raise interest rates at a record pace.’

According to De Jong, central banks have kept interest rates close to zero for years.  They then generated a huge amount of liquidity during the corona pandemic.  “That combination encourages debt.  Then we get inflation and then in 2022 those central banks will raise interest rates at a record pace.'
According to De Jong, central banks have kept interest rates close to zero for years. They then generated a huge amount of liquidity during the corona pandemic. “That combination encourages debt. Then we get inflation and then in 2022 those central banks will raise interest rates at a record pace.’ (ANP / dpa Picture-Alliance / Boris Roessler)

According to De Jong, central banks have kept interest rates close to zero for years. They then generated a huge amount of liquidity during the corona pandemic. “That combination encourages debt. Then we get inflation and then in 2022 those central banks will raise interest rates at a record pace.’

‘Dutch banks are very solid. They are solvent and very liquid’

Han de Jong, BNR economist

Squeak and creak

It is logical that the system will squeak and creak and that parties will fall over if they have not spread their risks properly. Now six central banks will facilitate the liquidity position in dollars at the banks. A sensible precaution, thinks De Jong, who emphasizes how much the dollar is a key currency in international monetary transactions. “In 2020, we saw problems elsewhere in the world arise due to a lack of dollar liquidity.” Now that liquidity is actually guaranteed.

No problem

De Jong does not think that Dutch savers need worry about their deposits. ‘Dutch banks are, as far as I can tell, very solid. They are solvent and very liquid. A second point is that the authorities in America and now again in Switzerland have responded very quickly and have responded well. Actually better than in 2008. So you certainly don’t have to worry about that in the short term.’

Never mind that De Jong feels ‘an underlying gnawing’. ‘And that is, of course, because of the very rapidly rising interest rates, there will still be casualties in the financial system, not in the Netherlands I think, but possibly elsewhere.’


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