Central Banks and the Governments are the ones to blame for the shitty situation that we find ourselves in. They’re the ones who are primarily responsible.
How can I make such a bold claim?
Well, all we need do is look at what’s been happening over the last number of decades and consider the actions that they’ve taken.
Let’s focus first on the FED, the Central Bank of the US.
It’s my contention that the situation in the US a direct result of the monetary policies pursued by the FED.
“Interest rates” and “Money Supply” are the two principal levers Central Banks use to manage (I would say control) the Economy.
I’ve done a number of videos about these topics, so I’m only going to talk very briefly about these here.
Let’s take a quick look at the Central Bank lever, “Interest rates”.
From 2013 up until relatively recently, interest rates were exceptionally low – lower than historical norms. And when I say, “relatively recently”, I mean prior to the recent round of FED rate hikes, which started back in Spring 2022.
I recommend looking at a chart produced by the FED themselves.
Simply type “FRED Federal Funds Effective Rate chart” into a search engine and look at the chart of the same name. This chart will show you the interest rates going back to 1954.
If you draw a curved line starting from the top of the first peak in the 80s going down to the right to the top of the penultimate peak, hitting the four highest peaks on the way down, you will get a trend line.
In doing this, we can clearly see a very pronounced downward trend in rates since 1981.
So we can therefore say, without any fear of contradiction, that the FED pursued a policy of exceptionally low interest rates for a 40 year period.
But why is this important?
Well, Interest rates are hugely important in an economy – they have an enormous impact.
Low interest rates are good for borrowers because money is cheap to borrow.
If we focus only on consumers … changes in rates can influence personal spending habits of consumers. Low rates tend to encourage consumers to borrow. Low interest rates often correlate strongly with a high consumer demand for goods and services. People feel more inclined to spend money not just on everyday items, but on more expensive items like cars and houses, at least more than they otherwise might.
(Bearing in mind that this is a very simplified account of what takes place.)
Low interest rates tend to have a big impact on the housing market also because it obviously makes getting a mortgage more affordable. The housing market is thereby stimulated. More houses are bought and sold.
A boom in the housing market is thus likely to occur.
Low interest rates have all sorts of other ramifications, but I as I said, I’ve talked about this elsewhere, so I won’t go into detail here.
Suffice to say that low rates are supposed to be used to stimulate a sluggish Economy and thereby avoid the worse effects of a recession. Rates were kept low after the Financ
