Another thing is that when you take out a loan, it creates money that wasn't there before. With low interest rates, you are encouraged to take more loans and therefore create more money. The
more money there is, the more that the value is diluted. The more that the value is diluted, the more that it takes to buy the same widget that cost some percentage less when there was less
money in the system. So if you have a credit card that has 3.9% interest rate, you might be tempted to carry the debt, however, if it jumps up to 12%, you will probably pay the card off. This
removes money from the system and therefore makes the value of the dollar go up.
Tom, you made some very coherent points for some one who
once told me they did not understand economics. -vbg-
your point about money creation is very valid, and remember
if you buy a bigger house, you would be buying curtains,
rugs, furniture, consuming more services, such as painters
and carpenters. etc.
Now that you won't have the painter to do extra work he'll
have a bit less work to do and put in slightly lower bids
on his projects. And it's not just you who's not moving.
Others are not as well.
well done :) |
