The central banks appear to be unable to lower the general level of interest rates by lowering the "cash rate", but if they raised the cash rate presumably that would result in a raise of the general level of interest rates.

This is reminiscent of the way Peak Oil means that OPEC can no longer lower prices by raising production, but they can still raise prices by withdrawing production.

Peak Credit?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

Its a floor. If the cash rate is pushed up, tomorrow, the mark-ups will remain about where they are, and the interest rates charged will increase.

On that logic, you are effectively dividing into two possible alternatives:

• a direct, mechanical, 1-1 relationship
  
• no effect

Since the reality is that the level of the floor affects the rates faced by bank customers, but is not the sole determinant, then what you've done is to leave reality in the excluded middle.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.