Monday, January 12, 2009

Newstopia explains the Reserve Bank

The money policy at all the world's reserve banks. If you increase interest rates, money costs more to borrow, which reduces spending, which lower demand which lowers prices which reduces the risks of inflation. So now with increased interest rates it costs more to borrow and buy a house therefore less to purchase day to day things like food, which lowers demand, which lowers spending, which reduces prices.
In the case of businesses, lower business spending will lower production which decreases supply, lower supply with the same amount of goods then prices will rise, makes sense right? Lower production which leads to less work, less work leads to increased unemployment which leads to lower spending and prices fall. You can't have a healthy economy without affordable prices.
Funny how the Fed controls everything and always has a scientific answer on the cause and effect of the perceived risks. The Fed creates and solves the financial problem. So why do we need the Fed???? WATCH THE VIDEO BELOW.

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