Post Reply  Post Thread 

Do higher interest rates act the same as lower money supply?

Author Message
VineFynn
Lord Protector
*


Posts: 107
Words count: 14,196
Group: Basic
Joined: May2014
Status: Away
Reputation: 3
Experience: 132
Glory Points: 0
Medals: 0

Post: #1
Do higher interest rates act the same as lower money supply?

I notice that interest is simultaneously described as nominal and not the prime rate. How effective then is it in determining inflation compared to the money supply, and do the two inversely affect each other 1:1?

Are there even inflation costs in this game?


I'm leaving and probably never coming back, so thanks for the interesting discussions I guess, dunno why im writing this nobody even irl gives a toss about me anyway

This post was last modified: 19.08.2016 09:30 by VineFynn.

19.08.2016 09:28
Find all posts by this user Quote this message in a reply
Ajay Alcos
Unregistered


Post: #2
RE: Do higher interest rates act the same as lower money supply?

Well higher interest rates tends to increase savings ratio as it encourages income earners in your state to save their capital for higher returns (assuming they are not being forced to spend their extra money on other things due to cost of living outweighing personal income). This however also discourages lending. Having a money supply that is lower than your state's total GDP tends to mitigate inflation, though this will not prevent inflation from jumping due to certain task choices, increases in tariffs & excise taxes and so-on so forth (same goes for deflation). So in a sense, having higher interest rates are only one cog in the solution out of many when attempting to counteract inflation.

21.08.2016 10:15
Quote this message in a reply
VineFynn
Lord Protector
*


Posts: 107
Words count: 14,196
Group: Basic
Joined: May2014
Status: Away
Reputation: 3
Experience: 132
Glory Points: 0
Medals: 0

Post: #3
RE: Do higher interest rates act the same as lower money supply?

Ajay Alcos Wrote:
Well higher interest rates tends to increase savings ratio as it encourages income earners in your state to save their capital for higher returns (assuming they are not being forced to spend their extra money on other things due to cost of living outweighing personal income). This however also discourages lending. Having a money supply that is lower than your state's total GDP tens to mitigate inflation, though this will not prevent inflation from jumping due to certain task choices, increases in tariffs & excise taxes and so-on so forth same goes for deflation). So in a sense, having higher interest rates are only one cog in the solution out of many when attempting to counteract inflation.


Thanks.


I'm leaving and probably never coming back, so thanks for the interesting discussions I guess, dunno why im writing this nobody even irl gives a toss about me anyway
21.08.2016 10:21
Find all posts by this user Quote this message in a reply
yangusbeef
Unregistered


Post: #4
RE: Do higher interest rates act the same as lower money supply?

VineFynn Wrote:
I notice that interest is simultaneously described as nominal and not the prime rate. How effective then is it in determining inflation compared to the money supply, and do the two inversely affect each other 1:1?

Are there even inflation costs in this game?


I'd assume it is a normal distribution in regards to the interest rates. Meaning, as you shift the mean, or nominal interest, up everything shifts up with it as well, including the prime rate. In other words, yes they inversely affect each other, and yes and higher nominal interest should lead to more saving, less borrowing, and less inflation or perhaps even deflation, the vise versa being true as well. Also, please note that Ars-Regendi defines nominal interest as the median between the prime and market rates.

Also, inflation costs are not translated in the nominal interest but rather money supply; I believe money supply changes arbitrarily relative to nominal interest if you have not enacted certain centralizing banking regulations.

31.08.2016 14:24
Quote this message in a reply
Post Reply  Post Thread 

Possibly Related Threads...
Thread: Author Replies: Views: Last Post
  Money Reform I velazquez 2 845 21.03.2021 21:43
Last Post: RealCyrusol
  Money supply and its influence on the economy MacJu 3 586 25.01.2021 11:45
Last Post: Errror42
  so.. I have incorrect interest rate payments Maelstrom 2 1,503 05.06.2015 16:30
Last Post: MrProper
  Consequences of Money reform II Modrevius 25 9,747 21.12.2014 19:23
Last Post: Helsworth
  Money reform II Malone 30 17,093 02.05.2014 11:46
Last Post: Daddl
  Money Reform I Jon9188UK 5 2,768 26.05.2012 11:17
Last Post: rimlanin
  Money reform I Malone 57 29,883 19.09.2011 14:44
Last Post: Helsworth
  Interest Rate Commissar 3 1,583 14.08.2011 19:44
Last Post: Helsworth
  Bank reform I (not money reform I) Kickass Q. 2 2,251 13.02.2010 08:07
Last Post: Helsworth

View a Printable Version
Send this Thread to a Friend
Subscribe to this Thread | Add Thread to Favorites

Forum Jump: