Quote:
Originally Posted by VRPdommy
Do they over-react at times... yes, but they do that based on the facts on the ground and projections of the future from that.
|
actually they do NOT overreact as the inflation alone is not the only parameter they have to look at.
they look also from WHERE the money comes from that feeds the economy.
this "boom" you can see i pretty much 100% from consumer credits because the export/import balance is worse than ever and the additional GDP is 1 to 1 the same number as the personal loans.
so if the FED is not increasing the interest rate this will explode and end up in unpaid loans at the end (similar to the 2008 crisis where this loans have been given to people that could not pay them back).
if such a bubble explodes a country runs into a deflation what is also well known as a site effect of a recession.
trumps economy magic was only to LEND the people money that they can spend more.
a healthy economy is based on spending OWN money OR to make MORE money out of the investment that was financed by loans.
private investments and consumption (in compare to business investments) are usually not profitable. with other words: a consumer spends today what he have to work for tomorrow - what is fine - but if he spend all what he makes in this life there is no next life to pay it back and this is why that have to be limited.