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All things are important – but everything we do leads into understanding Monetary Policy.
All things are important – but everything we do leads into understanding Monetary Policy.
Unemployment & Inflation have an inverse correlation. As unemployment goes down…inflation goes up (due to more people & more businesses having more disposable money).
Unemployment & Inflation have an inverse correlation. As unemployment goes down…inflation goes up (due to more people & more businesses having more disposable money).
Interest rates are raised to discourage spending & business risk & make borrowing more expensive. This leaves business’s and people with less money, slowing spending and rebalancing inflation rates. The opposite is true if a central bank wants to encourage inflation.
Interest rates are raised to discourage spending & business risk & make borrowing more expensive. This leaves business’s and people with less money, slowing spending and rebalancing inflation rates. The opposite is true if a central bank wants to encourage inflation.
When borrowing costs go up businesses have to get defensive. They will lay off staff and stop hiring new divisions. This raises unemployment.
When borrowing costs go up businesses have to get defensive. They will lay off staff and stop hiring new divisions. This raises unemployment.
The 2 major fundamental brackets for currencies are: risk on & risk off.
The 2 major fundamental brackets for currencies are: risk on & risk off.
The ‘risk off’ currencies are SAFE HAVEN currencies: The US Dollar, Japanese Yen & Swiss Franc.
The ‘risk off’ currencies are SAFE HAVEN currencies: The US Dollar, Japanese Yen & Swiss Franc.
When global economies become uncertain money flows out of risk on assets into ‘safe havens’ as they generally hold value better than others.
When global economies become uncertain money flows out of risk on assets into ‘safe havens’ as they generally hold value better than others.
The general correlation between stock markets & the USD is inverse. When the stock market climbs people park money there to benefit from the yield, outflowing the USD and bringing valuations down. When stock markets are performing poorly money moves back into safe havens like the USD, making valuations for the Dollar increase.
The general correlation between stock markets & the USD is inverse. When the stock market climbs people park money there to benefit from the yield, outflowing the USD and bringing valuations down. When stock markets are performing poorly money moves back into safe havens like the USD, making valuations for the Dollar increase.
When rates are cut the yield of a currency goes down making it less attractive for parking money there as investors will profit less from interest on savings. This causes demand to leave the currency and money outflows into other assets, so values fall.
When rates are cut the yield of a currency goes down making it less attractive for parking money there as investors will profit less from interest on savings. This causes demand to leave the currency and money outflows into other assets, so values fall.
Low or negative interest rates encourage spending and discourage saving which helps to get a lot of money flowing through the economy. This large money supply & flow allows inflation to grow. An example of this is the BoJ with their long standing -0.1% interest rates.
Low or negative interest rates encourage spending and discourage saving which helps to get a lot of money flowing through the economy. This large money supply & flow allows inflation to grow. An example of this is the BoJ with their long standing -0.1% interest rates.