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Show Whatever Happened to Interest Rates? Why are interest rates so high? Who pushed them up there? What's the prime rale and what has it got to do with your budget? The answers all have to do with inflation. L ' Simply put, whenever the supply of money grows faster than the supply of available goods, prices go up. That's what always happened everywhere. That's what's been happening in this country for the past' few years that money supply has grown faster than we have been able to product goods and services, serv-ices, despite galloping economic growth. And the money supply has increased for one reason: rea-son: Uncle Sam has been spending more money than he takes in and the Federal Reserve, our central bank, in effect printed the money needed to cover the deficit in 1 9(J7 and 18. The result was bound to be the higher prices that we've all been experiencing. experien-cing. What makes the situation worse is that when prices are rising, people borrow more and more money. Now the Government and the Federal Reserve are both taking action to brake inflation. As you might guess, the way to do this is to stop printing money so fast. |