Originally Posted by
Wm.Knowles
Hello everyone. The increase in interest rates by the CBI is another tool of intervention to reduce inflation by a central bank. Increased interest rates decrease the flow of money into the economy and help to reduce the base money supply. Raising rates by the CBI, while not as dramatic as purchasing dinar and removing it from the economy, is still an effective intervention that has been used (by the Fed) to slow growth. By the way, Jimmy Carter did not give us high interest and inflation. It has been said that we never paid for the Vietnam War. We "montetarized" the debt buy "printing money". Of course, by the time the effects of so much money being printed were felt in the economy, it did "hit" during the Carter administration. We got away with it due to our expanding economy eventually "absorbing" the inflationary pressures of the expanded money supply base through a growth in US GNP. Thank You.