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Originally Posted by Reaper
When interest rates rise, people generally spend less and borrow less to acquire consumer goods. Their money often gets committed to things like paying higher rates for their mortgages, etc. This helps to stem inflation due to lower market demand and a slow down of cost of living increases. This creates lower demand for increased wages by workers.
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that doesnt make sense to me ... i am not denying its a proven economic fact, but it still doesnt make sense!
consider, a person whose income is being spent more on interest charges is going to NOT ask for a raise?
if i have LESS disposable income, i am going to need MORE income to keep up with my lifestyle.
i can think of lots of businesses, including my own, that would be hurt if consumer spending decreased. why is this a good thing?
also, what factors are present that show the interest wont increase? i am curious what types of factors I should be watching for.
sorry if these are elementary questions, i find it all facinating.