4 ms·
It depends (especially with inflation), and yes.
by CamelCaseName 2y ago
It depends (especially with inflation), and yes.
- hgomersall 2y agoSo it's ok to have high interest rates with the hope it will cause unemployment in the hope that reduces inflation?
- aprilthird2021 2y agoProbably yeah, that's not usurious. Usurious is where you are basically using the loan to give you an excuse to repo / sell off the assets or collateral of the debtor.
- potato3732842 2y ago>using the loan to give you an excuse to repo / sell off the assets or collateral of the debtor. <cough> buy here pay here car lots <cough>.
- fdfgyu 2y agoPeople cannot borrow money from the central bank. Also, the deflationary effects of high interest rates are not because it causes unemployment, but because it reduced the rate of increase of the money supply. Of course, lowered money is recessionary, which leads to unemployment which puts downward pressure on wages; but wages aren't the reason for inflation - the increase in monetary mass is.
- throwaway2037 2y agoOverall, I like this post. Solid reasoning. This part I have small nitpick about: > Also, the deflationary effects of high interest rates are not because it causes unemployment, but because it reduced the rate of increase of the money supply. I would prefer to say: reduced money supply has an indirect effect upon unemployment. If it costs more to borrow money, corps will expand slower (fewer new jobs), or reduce costs (labour) to increase profits.
- fdfgyu 2y agoRight.
- hgomersall 2y agoThe Bank of England quoted reason is explicitly to suppress demand: https://www.bankofengland.co.uk/explainers/how-do-higher-interest-rates-help-to-lower-inflation https://www.bankofengland.co.uk/explainers/how-do-higher-int... It's hard to see how that's not synonymous with increased unemployment, particularly given the oft quoted Phillips curve and the NAIRU.