Quote:
Originally Posted by metal_geek
Not sure why the intrest rates would go up... Someone correct me but I thought lowering rates was used to reduce deflation and increasing rates were used to lower inflation.
Wasn't it Japan that lowered thier rates to 0% trying to stop thier crash but once they hit 0% all their leverage was gone? Isn't the US at 1% now and talking about lowering rates again.
I'm not sure why the rates in 80-81 were so high, was inflation the big problem that caused thoes 18% rates?
|
It works a couple of ways.
In a recession the banks get hosed on a lot of loans and get scared to lend money, they basicly refuse to lend unless the earn top dollar, the BOC will then raise the rates to get them lending again.
In 80-81 it was much the same as today, we had a large boom in 77-79 and then the crap hit the fan.