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Reply to "I genuinely don't understand these rate hikes"
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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Interest hikes decrease demand by making debt more expensive. [/quote] I still have to eat and drive. That demand doesn't change. [/quote] But what/where you choose to eat/drive and how often you do so is impacted. Interest rate hikes decrease demand by inceasing overall costs. Interest rate cuts increase demand by decreasing overall costs. It doesn't apply just to consumer spending. It also applies to business spending. Interest rate hikes incentivize saving. Interest rate cuts incentivize spending. In the 20th Century the Fed used to raise rates when there was a lot of economic growth and lower them when there wasn't. Then the GFC happened and we've had almost two decades of free debt since then. [/quote]
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