But the Business Daily has made it almost a preoccupation to come up with an hypothesis, accept it without testing (by the way researchers never accept an hypothesis; they only fail to reject the null hypothesis!).
Before the new law capping interest rates was enacted, anybody with a basic understanding of financial economics warned that it will lead to shrinking of credit. This is because if the caps (obviously determined arbitrarily) are below the price that a bank will lend to a risky borrower, the decision will be not to lend to such borrower.
The official attitude at the Business Daily was that those making such argument are scaremongers, and that lower rates will translate to high credit (as if the credit market is the same as the potato market).
While it is still early days, evidence has started trickling in that indeed what some of us anticipated as a consequence of this new law is playing out.
But trust the Business Daily to waffle when faced with the evidence. First, it reports the evidence of shrinking credit with a twist that it is the private sector that is shunning credit from banks - this of course being totally a nonsensical argument - see 'Businesses cut credit uptake as rate cap uncertainty bites' (Business Daily, 15th November 2016).
Then in quick order, there is realisation that the banks (villains in the Business Daily hypothesis) need to take the entire blame. So the great minds in Business Daily pen an editorial the following day to put the blame 'where it belongs' - see 'Change lending strategy' (Business Daily, 16th November 2016).
The editorial makes three arguments, all of which entrenching what I often call an attitude in search of justification.
- One, banks are deliberately starving the private sector of credit. So was the Business Daily reporting of the previous on the subject wrong and was the editorial seeking to correct it? No; this is textbook waffling.
- Two, the stringent screening by banks has led to more investments being channelled to government securities. So does the Business Daily understand the zero-sum argument? No; game theory is not thought in its school! More seriously, nobody there cares to know the difference between crowding out through the quantity channel and through the price channel. I presume that it is the obsession with interest rates (the price channel) that the Business Daily does have the guts to simply report the evidence that it is the quantity channel (the government's unquenched appetite for funds from the market) that carrying the day here.
- Three, what obtains is a betrayal of the spirit of the law capping interest rates. So does the Business Daily imagine that the spirit and the reality are one and the same? Oh well, let me take this opportunity to welcome everybody in that house to the real world!
