Healthy Money Healthy Planet - library.uniteddiversity.coop

100
If interest rates were zero the demand would be too high. The price of
property would balloon and this would lead to inflation. Look at what
happened when the New Zealand government offered student loans at zero
interest rates – the student debt mushroomed. Furthermore, students could
borrow at zero interest and put their money into a term deposit, making on
the deal.
Zero interest rates cannot be introduced in isolation from other government
policies designed to prevent speculation and control inflation. You need
resource taxes, too. For example, if every landowner paid a ground rent to his
or her local council for the privilege of having exclusive rights to occupy land,
and if this ground rent was sufficiently high, there would be no speculation in
land.
The value of certain leasehold properties in Auckland in the 1980s was
lower than that of comparable freehold properties because of the annual leases
(or land rentals) that had to be paid to the Anglican Church, and leases were
renegotiated upwards from time to time. When there is a price attached to
ownership, the price of leasehold property will always be lower than that for a
comparable freehold property.
Looking at the example of the New Zealand student loan scheme, the
situation only arose because zero interest rates were operating within a larger,
interest­based system. However, zero­interest and negative­interest currencies
can coexist with interest­bearing currencies when there are distinct and
managed boundaries between the systems. We will see this more clearly in Part