Repo rate cut by 50bps

TheJman

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Don't let them fool you, this is short term.

Don't buy car or big items this will be short term. By next year it will go up again.
It's a bit of a two edge sword here... there is a middle ground somewhere in there.

Lowering interest rates helps businesses that have debt (which is most), to save on debt repayments during a crisis like this ...

It also helps over burdened consumers (yes may be their own fault) from going into default on their loans - this would have a shocking knock on effect and we need to prevent as many defaults as possible.

The flip side of the sword is that lower interest rates encourages people to take money out of purely cash savings and invest them, this helps re-invigorate the economy by helping to "make the cash go around"

But you're spot on - if you couldn't afford the big house before the lockdown, don't go an over extend yourself now thinking you now can because of the low interest rates - we are probably near the bottom of our interest rates and they will start to go up...

Generally fixed rates on home loans also apply for much less time, 5 years or less, from what I have seen.
Spot on - the break costs are massive and you can't 'park' cash into a fixed rate loan - I mean you can, but it won't "change" your payment plan in anyway, unless you want to pay breakcosts, which on a home loan would be massive!!
 

NarrowBandFtw

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I'm going to nit-pick
as you are welcome to do, on the inflation definition I'm merely pointing out the classic definition from the 1500's until 1800-something is an increase in money supply, a direct correlation between that and prices was assumed and therefor you only needed to measure one of the two

Also you can't say "deflation isn't bad, just show me one historical example but the great depression doesn't count." Because that's one of the main reasons we think deflation is bad. It's like saying "communism isn't bad, and you can't show me a counter-example because I've arbitrarily excluded the Soviet Union"
The great depression (and 1990's Japan) doesn't count because deflation was not the cause. It would be hard to argue the cause of the Soviet Union's downfall was not communism ...

You have to measure inflation somehow, and any metric that you pick can be jimmied somehow
Which is why it is better to have a money supply that can't be inflated, then it doesn't matter how inflation is measured or how the metric is being gamed, it makes no difference to the money supply.
 

Speedster

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as you are welcome to do, on the inflation definition I'm merely pointing out the classic definition from the 1500's until 1800-something is an increase in money supply, a direct correlation between that and prices was assumed and therefor you only needed to measure one of the two


The great depression (and 1990's Japan) doesn't count because deflation was not the cause. It would be hard to argue the cause of the Soviet Union's downfall was not communism ...


Which is why it is better to have a money supply that can't be inflated, then it doesn't matter how inflation is measured or how the metric is being gamed, it makes no difference to the money supply.
Let's try stating this simply

Money supply /= inflation
 

netcruiser

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Wow. Just wow. Inflation, by every definition I have ever come across (and I've seen scores), is an increase in the general price level in an economy.
Lol. Every single argument I've seen on the internet about inflation is about people assuming different definitions of inflation.

One side talks about monetary inflation (the increase in money supply) and the other side about price inflation (the increase in prices).
 

Sinbad

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Lol. Every single argument I've seen on the internet about inflation is about people assuming different definitions of inflation.

One side talks about monetary inflation (the increase in money supply) and the other side about price inflation (the increase in prices).
Absolutely. Inflation just means "blowing up" or increase. That's why we have consumer price inflation, producer price inflation etc.
Inflation itself doesn't define what's increasing.
 

rietrot

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Which is why it is better to have a money supply that can't be inflated, then it doesn't matter how inflation is measured or how the metric is being gamed, it makes no difference to the money supply.
Not really possible and I don't understand why you would want this.

Money itself is subject to supply and demand. Trying to fix the value of money is like trying to fix the price of bread.
 

newby_investor

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Which is why it is better to have a money supply that can't be inflated, then it doesn't matter how inflation is measured or how the metric is being gamed, it makes no difference to the money supply.
You have a point here but you're also missing something.

Let's say you have a fixed supply of money. Say it's a precious metal. Or a cryptocurrency. Or something which you can't just arbitrarily print more of, as is the case with fiat currency.

If for some reason it gets more difficult to make bread, say locusts ate the harvest or rains didn't come, then bread will be more expensive, because there's less supply for the same demand. Even something weirder like a massive hole in the o-zone layer causing a high risk of skin cancer among farmers, you'd need to pay them more for them to be willing to risk it out in the fields. This will increase the cost of bread. (Cost-push)

Or if your population grows faster than your ability to grow wheat and make bread from it (say you put your population in lock-down so instead of being outdoors ploughing the fields, people are indoors ploughing... well you know), then your bread is going to go up in price simply because there are now more demand for the same supply. (Demand-pull)

The amount of yellow-coloured metal (or yellow-coloured internet coins) in the system hasn't changed. But the coin in your pocket which this time last year was worth one loaf, now is only worth three quarters of a loaf. And hence, without anyone changing the money supply, you have experienced inflation.
 

NarrowBandFtw

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Let's try stating this simply

Money supply /= inflation
I'll do you a favour and state it as simply

from the year 1500 to 1800:
money supply inflation = inflation

only in the times of Keynes and after:
CPI = inflation
 

NarrowBandFtw

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Not really possible and I don't understand why you would want this.

Money itself is subject to supply and demand. Trying to fix the value of money is like trying to fix the price of bread.
didn't say a fixed value, I said a supply that can't be inflated
 

NarrowBandFtw

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I call bullshit, give proof, thanks.
already have, but apparently posting a link that actually describes the theory of the time, with sources backing it up is not good enough

so go ahead and ignore the proof, I really don't care
 

Johnatan56

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already have, but apparently posting a link that actually describes the theory of the time, with sources backing it up is not good enough

so go ahead and ignore the proof, I really don't care
Are you talking about link dropping the wikipedia link? That's not a valid source.
 

Speedster

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I'll do you a favour and state it as simply

from the year 1500 to 1800:
money supply inflation = inflation

only in the times of Keynes and after:
CPI = inflation
Perhaps you're able to provide a source for this position?
 

newby_investor

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I'll do you a favour and state it as simply

from the year 1500 to 1800:
money supply inflation = inflation

only in the times of Keynes and after:
CPI = inflation
I'm not sure that the word "inflation" was used much if at all from 1500 to 1800. I'm also not sure that Keynes coined the term "CPI", that's very much a 20th century invention.

The principle is overall the same though. Even if demand-pull and cost-push and other influences of what we now refer to as CPI weren't named as such in history, they existed, and contributed to the prices of things.

However from 1500 to 1800, there definitely wasn't as big a global market as there is now, and the economy wasn't NEARLY as complicated.

Are you talking about link dropping the wikipedia link? That's not a valid source.
Uh... I'm going to disagree with you here. Wikipedia is usually very good. It might not necessarily support his "simply stated" point in this case, but the article itself is pretty informative.
 

Speedster

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Lol. Every single argument I've seen on the internet about inflation is about people assuming different definitions of inflation.

One side talks about monetary inflation (the increase in money supply) and the other side about price inflation (the increase in prices).
I tell you what, find me any economic textbook or published journal article that uses or defines the term inflation in any other context other than in reference to an increase in the general price level (and without an explicit reference to a different meaning).

Economists will talk of money supply growth, not money supply inflation.
 

Speedster

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Uh... I'm going to disagree with you here. Wikipedia is usually very good. It might not necessarily support his "simply stated" point in this case, but the article itself is pretty informative.
The article is informative but does nothing to support his claim that the term inflation is used in reference to an increase in the money supply.
 

NarrowBandFtw

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Inflation simply means increase. If it can't be inflated it needs to be a fixed amount/value.
fixed amount != fixed value

inflation in the sense of currencies of course always refers to the amount increasing (and the value decreasing as a consequence)

so when I say "can't be inflated" I'm referring to the inability to create more of it, not any limitation on the value of it, though the natural side effect would be an increase in value of time
 

NarrowBandFtw

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The article is informative but does nothing to support his claim that the term inflation is used in reference to an increase in the money supply.
The article gave you a good summary of the position of Copernicus who was first credited for theory w.r.t. inflation

Hell dictionaries as recently as 1983 were pretty clear:
Webster’s 1983 Definition of Inflation
According to Webster’s New Universal Unabridged Dictionary published in 1983 the second definition of “inflation” after “the act of inflating or the condition of being inflated” is:

An increase in the amount of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices: it may be caused by an increase in the volume of paper money issued or of gold mined, or a relative increase in expenditures as when the supply of goods fails to meet the demand
You can find the dictionary, or just trust the source: https://inflationdata.com/articles/2010/07/21/real-definition-inflation/


not that it matters, I knew I was right all along, just as I know you will not change your position despite the facts proving you wrong
 

Johnatan56

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The article gave you a good summary of the position of Copernicus who was first credited for theory w.r.t. inflation

Hell dictionaries as recently as 1983 were pretty clear:

You can find the dictionary, or just trust the source: https://inflationdata.com/articles/2010/07/21/real-definition-inflation/


not that it matters, I knew I was right all along, just as I know you will not change your position despite the facts proving you wrong
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Selective quoting is very nice.
 
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