A recent headline read, “China’s Central Bank lowers borrowing costs to clean up local debt mess.” There is just something inherently propaganda-like about the use of the phrase “lower borrowing costs” that rubs me the wrong way.
It’s probably because there is an element of deception to it that makes it sound like manna from the central bank in an expansive, parched desert of bad debt. Oh so good to lower nominal costs. No? The reality of it is more likely that money has been tight and the real value of the currency appreciated which raises the real cost of debt without so much as a contract renegotiation. The central bank is simply adjusting to a new market reality as a result of market price adjustments from changes in the value of the currency. It isn’t lowering real “costs,” doing favors for anyone, or giving anything away, especially punch. It likely has done just the opposite.
I had been experiencing annoyance over the use of the phrase “lowering borrowing costs” in the context of central banking and finally focused on it to have my moment of summary clarity. Too bad there are too many people needing a ton of bricks, or more, to drop on their heads before they become as annoyed with this kind of journalistic malpractice as I.
PS: The quality of Bloomberg’s financial reporting has jumped the shark down to a stunning level of crap-tastic.
PPS: Please, central bank, stop doing us these kinds of “favors.”