It would have been a well-advised idea had it been done when it actually mattered. I’m no economic expert but wouldn’t drastically swinging the other way also lead to inflation? For example (made up numbers) if $10,000 is the same as $1 a year ago (low interest rate) and now that $10,000 accrues 80% interest, that would just cause even further inflation?
It’s incredibly complex to accurately predict what will happen and this is entirely plausible. I can also imagine there being people who have (example) $10,000, wait a year for it to be $18,000, and spend the $8,000 as “free money”. Rather than saving it which won’t put you ahead of others as they also benefit from the 80% interest (perhaps more so). I’m guessing that’s why there’s the caveat of even capital distribution which hasn’t happened anywhere in the history of life on Earth at any point in time presumably.
Yeah before is better than now, but now is better than later.
To your second point, I’m not entirely certain either, but my understanding is that with a high interest rate, it cuts spending which would drive down inflation.
It does this by encouraging people to save (“wow savings interests rates based off of an 80% interest rate!”) And discouraging people from buying\getting loans (“buy a home? With 80% interest?! No”).
With less spending, companies have to begin to drop prices or increase the amount of product offered to encourage buying.
It would have been a well-advised idea had it been done when it actually mattered. I’m no economic expert but wouldn’t drastically swinging the other way also lead to inflation? For example (made up numbers) if $10,000 is the same as $1 a year ago (low interest rate) and now that $10,000 accrues 80% interest, that would just cause even further inflation?
It reduces spending, because saving is now exceedingly optimal.
Less spending means inflation generally comes down because companies lower prices to meet the lack of demand.
But yes, too high and it can cause even worse inflation, assuming an even capital distribution among the people.
It’s incredibly complex to accurately predict what will happen and this is entirely plausible. I can also imagine there being people who have (example) $10,000, wait a year for it to be $18,000, and spend the $8,000 as “free money”. Rather than saving it which won’t put you ahead of others as they also benefit from the 80% interest (perhaps more so). I’m guessing that’s why there’s the caveat of even capital distribution which hasn’t happened anywhere in the history of life on Earth at any point in time presumably.
Yeah before is better than now, but now is better than later.
To your second point, I’m not entirely certain either, but my understanding is that with a high interest rate, it cuts spending which would drive down inflation. It does this by encouraging people to save (“wow savings interests rates based off of an 80% interest rate!”) And discouraging people from buying\getting loans (“buy a home? With 80% interest?! No”). With less spending, companies have to begin to drop prices or increase the amount of product offered to encourage buying.