Government intervention in free markets often leads to unforeseen consequences.
Recent policy proposals to lower credit card interest rates have sparked an interesting discussion. Many people don't understand why bank interest rates are so high. In fact, there's economic logic behind it: banks set high interest rates to cover losses from customers who cannot repay their loans. This is called risk-based pricing—essentially the market regulating itself.
What if these rates are artificially suppressed? It sounds friendly to borrowers, but the consequences can be harsh. Unable to offset bad debt losses through interest, banks either tighten lending standards (making it harder for poor people to borrow), raise other fees (increasing hidden costs), or simply exit the market (shrinking financial supply). In the end, ordinary people suffer the most.
This is why market participants—including crypto investors—should be vigilant against policy-driven price controls. When market signals are distorted, real risks are often hidden rather than eliminated.
Government intervention in free markets often leads to unforeseen consequences.
Recent policy proposals to lower credit card interest rates have sparked an interesting discussion. Many people don't understand why bank interest rates are so high. In fact, there's economic logic behind it: banks set high interest rates to cover losses from customers who cannot repay their loans. This is called risk-based pricing—essentially the market regulating itself.
What if these rates are artificially suppressed? It sounds friendly to borrowers, but the consequences can be harsh. Unable to offset bad debt losses through interest, banks either tighten lending standards (making it harder for poor people to borrow), raise other fees (increasing hidden costs), or simply exit the market (shrinking financial supply). In the end, ordinary people suffer the most.
This is why market participants—including crypto investors—should be vigilant against policy-driven price controls. When market signals are distorted, real risks are often hidden rather than eliminated.