THIS IS WHAT CAUSES THE CHAOS
In science, you state the principles, and then they comply with them.
In economics they state the principles and then do something else...
FIRST LESSON IN ECONOMICS
Prices adjust to balance supply with demand.
If they did, then when the rate of inflation increases, all prices would rise faster.
ALL SUBSEQUENT LESSONS
What you were taught in lesson one is wrong.
Interest rates do rise but:
#1. Treasuries do not increase in price. They fall.
#2. The currency does not fall in value. It rises.
#3. The cost of home loan repayments does not rise a little faster, like rentals do. They either remain fixed which can be dangerous in a recession, or they leap upwards.
#4. Property prices do not rise a little faster. They fall.
It is a man-made design for financial instability, confusion, and destruction.
In science, you state the principles, and then you comply with them.
In economics you state the principles and then do something else...
THAT IS WHAT CREATES THE CHAOS
THE GOOD NEWS
We can change that design so that:
Savings / Treasuries will rise in price, the currency will fall, the cost of home loans will change somewhat in the right direction BUT less quickly that average incomes / earnings. Property prices will rise a little faster.
Where we now have
- Social and economic chaos,
- Social damage and political turmoil, with
- Rich pickings for the wealthiest among us, as families lose homes and businesses and
- Money is made and lost out of all the volatility.
All that can change so that instead:
- Wealth will stay with those who earned it.
- Economic efficiency will rise significantly, and
- Optimum use will be made of all the nation’s resources
Monetary policy - Simple interventions can keep the economy firmly on course. Experts will not need to be consulted to explain it or the consequences.
People will be able to make financial plans which are:
- More reliable,
- More stable,
- More understandable, and
- Less costly.
WHAT WE WILL FIND IS THAT:
#1. Personal savings and pensions will rise as if the retirees are still getting wage rises.
#2. The cost of government debt will fall. World-wide there is an estimated US$80 trillions of unsafe treasuries destroying many financial plans and savings.
#3. The cost of home loans will be cheaper and will rise less slowly than National Average Earnings are rising. The monthly repayments could fall every year if incomes are rising by less than 4% p.a. The property sector, a third of the national economy in some nations, will stabilize and property values will be safer and affordable in nations / places which are not over-crowded.
#4. Commercial finance will be cheaper, larger, and more effective.
#5. The value of the currency will balance imports and exports and will not be altered by changes in interest rates. International investors will have their own market in currencies, with their own currency prices. This will save billions in lost international and other investments.
Economic output will grow faster and in a more sustained way with fewer, or no, recessions to worry about.
But all this depends upon whether the political side of things is in good order.
Engineers can design the best and safest of cars, but who drives them and what then happens is not up to them. We can provide the theory, and the most efficient economic model, but that is where our task ends.
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