intelligencer, Split system:
0.5% cut to borrowers means they have the cut to spend or put into the loan.
0.5% additional interest to savers means they have a bonus to spend or save.
Borrowers mostly use their cut to put into the loan thus extinguishing debt and reducing the effective money suppy through fractional reserve banking.
Savers if they spend stimulate the economy and if they save multiply the money supply via frb.
Giving it all to borrowers penalises the savers. It's all one sided. How does splitting the benefit defeat the purpose of a rate cut?
Good to see a bit of lateral thinking on HC! I don't have the writing skill too present it so succinctly.
I have had similar thoughts, considering that reducing interest rate would actually discourage spending by certain sectors of the community.
The intention of the the RBA in cutting the interest rate is to stimulate the economy by dispersing it to all sectors.
All that has happened, is to assist the realestate side of the economy, mainly in the reduction of people's mortgage.
Reducing interest rate has failed to stimulate the economy in many parts of the world. Some economists have claimed that the equivalent to our RBA in other parts of worlds, are flawed in reducing rates.
All that the number of rate cuts has done, is to SCARE OFF certain sectors of the community who previously had the ability to spend, such as retirees etc. The self funded retiree's concentration is on, will they make sufficient funds for their living expenses since the continuous interest cuts.
