Fixed-rate Loans

I have had an idea about fixed interest rate borrowing for some time now. I wonder how long it will survive exposure on the internet !

Inflation is a monetary phenomenon, and the banking industry is where money is created and, for inflation, over-created. (I am not overlooking other engines of inflation).

Fixed-rate lending means that the banking industry has a vested interest in avoiding inflationary behaviour. Hence, my idea is that it would help to avoid inflation, to encourage more use of fixed-rate borrowing.

It was often said of Germany a couple of decades ago that its good record on inflation was related to the prevalence of fixed-rate lending, not least in the residential mortgage market.

(This piece reproduces a comment I have made to this article on The Economist's Free Exchange service, which I heartly recommend to all those with an interest in economic questions).