4 ms·

Recessions are almost always deliberately caused by central banks to control inflation by increasing unemployment and decreasing wages. Occasionally they are ca

Recessions are almost always deliberately caused by central banks to control inflation by increasing unemployment and decreasing wages. Occasionally they are caused by financial crises.

cyberferret 10y ago
Well, I am old enough to remember "The recession we had to have" back in the 80's here in Australia. And yes, that was triggered by the federal government and the reserve bank for what it was worth. I think interest rates have been too low for too long. Yes, it has encouraged spending, but methinks too much spending as I have seen friends and family totally overextend themselves on huge loans for huge houses just because they could. Even interest rates move up even 1%, they will be pushed against the wall to try and service those loans, and that in itself may trigger massive sell offs and bring housing prices crashing down. It's basically a tightrope walk across a windy gorge at the moment - everything is precariously balanced, but for how much longer??
- TheSpiceIsLife 10y ago
  I can't understand what motivates people to borrow the highest amount the banks will lend them. What do they think is going to happen when interest rates go up two or three percent? What do the banks think is going to happen?
  - researcher11 10y ago
    The banks think they'll be bailed out. Maybe not in a US way with direct cash injection but maybe in an EU way with the government creating a Bad Bank and buying their mistakes at above market rates. Of course they'll lie about it and say it's a good investment to sell it to the public. Everyone who has money is beholden to the banks.
- jacques_chester 10y ago
  The Reserve Bank's legal mandate is inflation-band targeting; though they do keep an eye on exports and employment. It's a tricky act because raising interest pushes down inflation, but it also hurts borrowers, strengthens the dollar and hurts exporters. The Australian rate is substantially higher than the Federal Reserve's. The Fed has a broader remit and is apparently perfectly happy to run nearly free money for years on end. Compared to the US, Australian monetary policy is quite conservative.

Recessions are almost always deliberately caused by central banks to control inflation by increasing unemployment and decreasing wages. Occasionally they are caused by financial crises.

cyberferret 10y ago

Well, I am old enough to remember "The recession we had to have" back in the 80's here in Australia. And yes, that was triggered by the federal government and the reserve bank for what it was worth. I think interest rates have been too low for too long. Yes, it has encouraged spending, but methinks too much spending as I have seen friends and family totally overextend themselves on huge loans for huge houses just because they could. Even interest rates move up even 1%, they will be pushed against the wall to try and service those loans, and that in itself may trigger massive sell offs and bring housing prices crashing down. It's basically a tightrope walk across a windy gorge at the moment - everything is precariously balanced, but for how much longer??

TheSpiceIsLife 10y ago
I can't understand what motivates people to borrow the highest amount the banks will lend them. What do they think is going to happen when interest rates go up two or three percent? What do the banks think is going to happen?
- researcher11 10y ago
  The banks think they'll be bailed out. Maybe not in a US way with direct cash injection but maybe in an EU way with the government creating a Bad Bank and buying their mistakes at above market rates. Of course they'll lie about it and say it's a good investment to sell it to the public. Everyone who has money is beholden to the banks.
jacques_chester 10y ago
The Reserve Bank's legal mandate is inflation-band targeting; though they do keep an eye on exports and employment. It's a tricky act because raising interest pushes down inflation, but it also hurts borrowers, strengthens the dollar and hurts exporters. The Australian rate is substantially higher than the Federal Reserve's. The Fed has a broader remit and is apparently perfectly happy to run nearly free money for years on end. Compared to the US, Australian monetary policy is quite conservative.