Interest Rates And Who Drives The Bus
The phrase, "interest rate", is a terminology that we are bombarded with daily. The news is full of reports as to interest rate rises or the easing of interest rates. So where did this all start and who is driving this bus?
Economies that revolve around goods and services have been around since mankind has walked the planet. These primitive economies evolved through trade between tribes and the supply and access to available goods such as food and goods, such as skins or flint as an example.
So even hunters and gathers had an economy in these goods and services. Imagine that your tribe had an overabundance of meat but were short on tubas or greens. This shortage or lack of goods would result in trading with neighboring tribes. If the need of the goods from the other tribe was greater than your tribe then a form of interest would take place within the trade off.
As an example one tribe would want meat or skins as they had little access to these types of commodities, so the trade would cost them more in what they had to trade. Primitive interest.
When crop growing came into being, if a community ate the entire crop without saving any of the seed for the next planting season their economy would fall into recession as they had eaten their potential for any future growth.
Now we have global economies that influence worldwide interest rates. These rates are still reflected in the supply of goods and services. Although the main goods in today's economy is centered on the cash flow or cash market, as in the phrase, "money makes the world go around."
In today's economic outlook a country can have a good bank balance by having a budget that is in surplus. Allowing the government to invest in the nation's infrastructures which, then in turn, increases the nation's future growth potential.
A country may have an abundance of goods and services which boost the economy through trade. These include natural resources such as oil or minerals, a healthy manufacturing sector, food sources and people in general can be an asset and a form of resource.
So a country's bank balance and health report are some of the influencing factors on interest rates. A stable economy equals stable interest rates. Another major influence is the world cash exchange rate.
These worldwide exchange rates reflect on your local bank. All the banks need to borrow money from worldwide cash resources, from time to time, to ensure that they then have enough money to service their customers. So worldwide exchange rates are vital to the interest rate that you will pay on any loan or any savings that you have.
So who is the bus driver? You could split the driving shifts between, supply and demand. Interest rates tend to fall when the world wide demand is high for a country's goods and services. If the supply of the country's goods and services dry up, as in a short fall in crops due to droughts or floods.
Or any other of the goods that a country can provide are in short demand on the world market, then interest rates are likely to rise.
In conclusion we are still a world of hunters and gathers trading as humans have always done. The only difference is our economies are of a much larger scale incorporating the resource, cash, as the major commodity.
Economies that revolve around goods and services have been around since mankind has walked the planet. These primitive economies evolved through trade between tribes and the supply and access to available goods such as food and goods, such as skins or flint as an example.
So even hunters and gathers had an economy in these goods and services. Imagine that your tribe had an overabundance of meat but were short on tubas or greens. This shortage or lack of goods would result in trading with neighboring tribes. If the need of the goods from the other tribe was greater than your tribe then a form of interest would take place within the trade off.
As an example one tribe would want meat or skins as they had little access to these types of commodities, so the trade would cost them more in what they had to trade. Primitive interest.
When crop growing came into being, if a community ate the entire crop without saving any of the seed for the next planting season their economy would fall into recession as they had eaten their potential for any future growth.
Now we have global economies that influence worldwide interest rates. These rates are still reflected in the supply of goods and services. Although the main goods in today's economy is centered on the cash flow or cash market, as in the phrase, "money makes the world go around."
In today's economic outlook a country can have a good bank balance by having a budget that is in surplus. Allowing the government to invest in the nation's infrastructures which, then in turn, increases the nation's future growth potential.
A country may have an abundance of goods and services which boost the economy through trade. These include natural resources such as oil or minerals, a healthy manufacturing sector, food sources and people in general can be an asset and a form of resource.
So a country's bank balance and health report are some of the influencing factors on interest rates. A stable economy equals stable interest rates. Another major influence is the world cash exchange rate.
These worldwide exchange rates reflect on your local bank. All the banks need to borrow money from worldwide cash resources, from time to time, to ensure that they then have enough money to service their customers. So worldwide exchange rates are vital to the interest rate that you will pay on any loan or any savings that you have.
So who is the bus driver? You could split the driving shifts between, supply and demand. Interest rates tend to fall when the world wide demand is high for a country's goods and services. If the supply of the country's goods and services dry up, as in a short fall in crops due to droughts or floods.
Or any other of the goods that a country can provide are in short demand on the world market, then interest rates are likely to rise.
In conclusion we are still a world of hunters and gathers trading as humans have always done. The only difference is our economies are of a much larger scale incorporating the resource, cash, as the major commodity.