ANALYSIS: Why Australians needn't panic about possible interest rate rises as RBA ponders next step
They say talk is cheap, although for the past few years, it hasn't been quite as cheap as cash.
There now is little doubt that the pandemic has changed the course of history, or at least been the catalyst for a long-overdue shift in the tectonic plates of the financial world.But before you hit the panic button, it might be worthwhile to sit back and chill just a little. For unless you've plunged everything into ultra high-risk investments, like technology companies that don't earn any money, the chances are you'll survive the shift just fine.
But they lost control a year ago, and while they remain a powerful force in the marketplace, they are far from omnipotent. Check out the graph below, at the market where interest rates really are set; that dictate to banks the rate at which they can borrow and lend. It’s been the same story across the globe. In Germany, until last week, government bond rates for years have been below zero. That’s just ludicrous, conflicting with 5,000 years of human history and any sense of logic.
Marshalling its low-cost labour force, it produced everything from clothing and shoes to tools and heavy machinery and ultimately, high-tech communications. And because they were produced at such a massive scale, it could export them at prices way below the cost of production in the developed world. Central banks like the Bank of England have cut interest rates in times of crisis over the past 25 years.
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