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Economics question...

Could someone please explain to me why, if prices on everything go up due to inflation and people are having trouble affording the things they need, why does the gov't raise the interest rates and tell us it is to help curb inflation? Seems to me by raising the interest rates, they are adding to the list of things we can't afford.

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Ryderbike

Higher interest rates encourage saving and discourage borrowing and, in turn, spending. In response, companies increase their prices more slowly or even lower them to encourage demand.

SW-User

@Ryderbike I get the concept, but I'm curious how well it's going to work right now with so many already debt ridden.

Ryderbike

@SW-User the goal is to drive consumer prices down. However since the main cause of inflation is the worlds supply chain things are going to get worse before they get better .

There are very few things manufactured in America that don’t have Chinese components.

Shopping at Walmart was fun wasnt it? Americans love those cheap prices,

Now comes the real cost .

SW-User

@Ryderbike The fairytale is over. Interesting, how we can relatively produce things cheap now and yet so many have more debt than in the past. However, I think the Bank needs to exercise restraint as too many will be bankrupted.

Ryderbike

@SW-User we don’t produce things cheaply. We let cheap labour in other nations produce things .

SW-User

@Ryderbike I was talking in a broader context than locally.

SW-User

@Ryderbike In the end, it might help our local economies if we become more dependant upon them again.

Ryderbike

@SW-User ok..I see your point . But we have to think in terms of how much we want to rely on other nations. We see how quickly things like pandemics and wars can start and we are unprepared.

SW-User

@Ryderbike We made a gamble (for economists, likely an educated gamble) but essentially a gamble.

SW-User

@Ryderbike In market theory, gaps will start to be filled and new solutions will be looked towards the longer these things prevail.

Ryderbike

@SW-User well in all fairness life in general is a gamble.

Yesterday is gone..tomorrow is uncertain ….so what’s left ?

The moment ..our only guarantee .

SW-User

@Ryderbike Yes, and I like in Ontario right now, how much support is being given towards the labour movement. That's a gamble Ford took, and I think he's owning it now. Outside conversation, I know, but on topic of gambling, there are ways to legally challenge the use of the notwithstanding clause and in the end I imagine that's how it's going to be resolved here.

Ryderbike

@SW-User Vancouver island .

Originally from Winnipeg

SW-User

@Ryderbike Thanks, I'm about an hour west of Toronto. I imagine similarities are large in our local regions.