Pretty much title. I've seen this talked about a lot but I only very vaguely know what all this means, could someone elaborate on what happened, why it happened and what the consequences of it are?
Pretty much title. I've seen this talked about a lot but I only very vaguely know what all this means, could someone elaborate on what happened, why it happened and what the consequences of it are?
So the main way the US government “creates” money is by loaning money to banks who then loan that money to other banks, businesses, and individuals. Those banks have to pay interest to the government, and then charge their customers a higher interest rate and pocket the difference.
If the government charges those banks a very low/no interest rate, they can loan that money out at lower interest rates and for riskier ventures because it’s easier to make their money back. At the individual level this means easier to get mortgages with better terms, at the business level it means easier to get funding to start a new business or keep your existing one afloat. If the interest rate goes up, it becomes harder to make your money back, so every level gets stingier and more risk averse.