Thursday, October 26, 2006

Inflation and Interest Rates

The drought has caused the cost of food items to increase.
This causes a rise in the CPI index.
This causes a rise in the rate of inflation.
It's time to raise interest rates.

Do you understand this? Ok let me explain. When we are faced with rising cost of living, in this case the cost of food, the government (Treasury) feels it has an obligation to flex it's muscle.
All government departments need to justify their existence by DOING SOMETHING.
So, we the people, must suffer twice as much because the cost of food is going up. Twice because we will be punished with an increase in interest rates. This hurts everybody who has a mortgage loan. That's nearly everybody. Maybe not. The rest will have their rents increased. Did I leave out anybody? Oh yes, business also is affected by an increase in interest rates, but they just pass the costs on to the consumer, by increasing the price of their goods. This will cause an further rise in the CPI and another series of hikes in interest rates.
Welcome to the treadmill of the rat race.

4 comments:

none said...

They are supposedly trying to stave off stagflation with their meddling.

I don't buy it.

Lexcen said...

Hammer, "meddling" is exactly how I would describe it.

Little Lamb said...

And yet the workers pay is not increased that much. Or should I say the people who have to pay for all these increases?

Kirsten N. Namskau said...

Life is hard. I don't know how humanity has survived for 1000's of years.

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