Lowering down of interest rates is something quite familiar in the economists’ circles. Here’s one more argument strengthening this very thought and philosophy. Every economic activity finds its origin in enterprise and if an entrepreneur finds it lesser risky by keeping money in banks rather than investing it in market, he is likely to refrain from enterprise for obvious reasons and hence lesser economic activity.

One may argue that if big capital formation takes place with the banks this way, then there is a possibility of banks doing the enterprise. But again the banks when charge similarly high interests on the loans they provide for investments, cannot be assumed to find themselves promoting enterprise in any way. Further any bank or other such financial institution enters into the investment market itself then also the market’s risk factor in comparison to the high interest rates will make the banks tend towards lending money more than investing into business.

On the contrary if the banks charge no interest on the money they lend then entrepreneurs will find no outlet for making any gains in their money but invest. And if at all for practical reasons people shall leave their money in banks then the banks themselves will try to invest them hence enterprising for economy. In a nutshell higher interest rates repel investment and economic development later while no interest is a boon for enterprise. Now the only solution to the problem of how to reach this ideal stage from now is by constantly lowering them down.