the question of the future

erste group bank
mr. andreas treichl, ceo
am belvedere 1
at-1100 vienna

vienna, 02.12.2019

dear mr. treichl!

thank you for your clever interview in “der standard”. i do not consider you to be “too stupid and too cowardly” for an argument, as you once said about our politicians. therefore i would like to contradict you in principle. the “asset gap” does NOT open more and more due to the zero interest rate. but on the contrary.

theoretically, the situation is crystal clear: if the price of money, the interest, is eliminated, then money assets no longer multiply by themselves. with a negative interest rate, the possession of money is even punished – the bigger, the higher. this means that the “asset gap” naturally closes.

so what does that mean for the practice – and this is where the exciting economic discussion starts. of course, with a zero interest rate, the value of alternative investment forms increases, the more long-term, the more: real estate. and we are already facing this phenomenon. how do we want to deal with the rising prices for land and soil? what do we do with the basic human need for living space?

the answer seems to be totally logical to me: as a negative interest rate rewards debt, the public sector takes on as much debt as possible in order to finance housing. at the same time, it even pays back debts due to the negative interest.

in what form this happens, directly as public property, indirectly through co-operatives or through the financing of private owners, will have to be negotiated politically in detail in each case. it is certain that this will be the crucial political question of distribution. in the future it will no longer be about abstract “money” but about concrete “space”. (and the key resource here will no longer be petroleum, but water.) the role of private banks in this matter will depend on the wisdom and courage of their respective management.

yours faithfully

peter wurm

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