Wednesday, December 19, 2018

Why Does raising interest rates help prevent some national and international Calamities?

We are presently approaching a crisis like this partly triggered by Trump reducing the unemployment rate.

Even though reducing the unemployment rate as far as it is now is a good thing for the common man and woman, it also can destabilize the economic system as inflation tends to rear it's head caused by having to raise wages nationwide because of low unemployment rates. Because when the unemployment rates go below a certain point (Like they have) there aren't enough people to employ for businesses and companies. This then causes head hunters to steal the best employees from companies by paying them bonuses and more nationwide like now. This then causes inflation nationwide and sometimes worldwide.

The solution to this economic problem traditionally is to raise interest rates to "cool Down" the economy so that inflation doesn't take off and harm everyone on a fixed income worldwide. So, raising interest rates is the best weapon against inflation that we presently know of worldwide.

So, the Fed normally raises interest rates which helps people on fixed incomes nationwide by damping down inflation and growth and this also helps people on fixed incomes by allowing them to earn more income on their savings (even if they are not invested in the stock market).

So, raising interest rates helps all people on fixed incomes so they don't have to pay beyond their pocketbook for food and all necessities of life. It also helps them by increasing the interest on their savings accounts nationwide too.

However, it does make it harder for businesses to borrow money because the interest rates they pay borrowing money much higher. so this tends to damp down what businesses are capable of doing. However, all this is completely cyclical in the same cycles that cause recessions, great recessions and Great Depressions. We are presently overdue for a recession by the way from all historical data if you study it. So, expecting a recession by 2019 or 2020 is realistic (if you study the history of recessions).

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