Comments by "Matthew Loutner" (@Matthew_Loutner) on "Econ Lessons"
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@peterwilliams2152 When a country has a high interest rate, consumers stop borrowing money for larger purchases, such as cars and homes.
Business people cannot borrow money to start new businesses, or expand existing businesses, or borrow their way out of a cash crunch.
A high interest rate shuts down your economy to almost zero growth, and at times, negative growth.
It takes time to come into play, as the effect ripples through the economy, but the longer the interest rate stays high, the more damage is done to the economy. At a certain point of slowing down, it becomes nearly impossible to start the economy to start back up again.
The net result of it all is tax revenues drop, and the government cannot pay its bills.
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