Quote:
Originally Posted by OrdoSeclorum
I'm not an economist, but aren't *higher* rates more typically associated with low inflation? As interest rates are reduced, more money is borrowed, thus more money is spent, causing the economy to grow and inflation to increase?
Of course, maybe that's wrong. But if it is, it's wrong in a way where no one knows what's going on.
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Higher rates are put in place in order to lower inflation or slow down the economy. When the Fed is lowering rates, that typically means inflation is low and the economy needs a boost. Of course, Japan has had 0% interest rates and deflation for a while now, probably driven by an aging and shrinking population. A problem the US will likely face soon enough unless we allow more immigration. The guaranteed 3% COLA in IL's pensions is likely to be a problem for a while. This is why employers need the ability to change benefits. You can't predict the future and having something long term such as pensions not being able to be changed is ridiculous. The Federal government changes Social Security but for some reason Illinois pensions were constitutionally guaranteed.