2014-7-15
Island Camp, WA

Economics:

When interest rates go up, poor people have a harder time borrowing. Mortgage rates go up, so mortgage payments increase. The effect is inflation for the poor, and higher profit margins for lenders.

Credit card rates go up; again, higher monthly payments mean inflation for the poor. Rising interest rates is a tax; the rich can afford it and their lifestyles don't suffer, because they get interest on money they can loan to banks or the stock market. The poor suffer foreclosures and reduced buying power.

A better policy than raising interest rates: index transfer payments and bank accounts to inflation, and keep interest rates low.

Rising interest rates imply that certain people should not own houses or use credit. Meanwhile, lenders make more money from higher interest rates. So rising interest rates increase income disparity; the gap between rich and poor widens, since the rich get more income from their money. But for the poor, having no money, rising interest rates means higher costs.

So, don't raise interest rates. Zero (or negative, so people get paid to borrow) interest rates should be trhe long-term policy. Deal with inflation by indexing.