Amudim

[GreekIdiot]

Markets take a breath amidst rumours of rate cuts by the Central Bank of Amudim; Himmelshtern joins the pressure

December 5636

Tel Bira, Adishut Nisrad - After being repeatedly asked by several journalists, the Head of the Central Bank of Amudim was forced to acknowledge that the institution was in fact reviewing potential scenarios on interest rate cuts in a press conference on Friday. With the financial industry heavily tied to Canrillaise banking, the Eroncourt-East Stock Exchange (EESE) reacted positively on Friday's information throughout its entire session, creating a wave of relief across markets in the West, with the Fort William Stock Exchange (FWSE) and Tel Bira especially echoing the overall sentiment.

What do interest rate cuts mean?

It means that money and money lending will become cheaper - what the Central Bank of Amudim is concerned about, however, is the possibility that rate cuts will represent "too little too late" and both demand and liquidity will remain low as the bear market digs its teeth deeper.

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But let's take a step back and understand the bigger picture, here.

While there are quite a lot of key performance indicators (KPIs) out there on even more economic drivers affecting markets, a few of the most important ones are:

1. How much money is flowing (liquidity)
   
2. How much money costs to borrow (interest rates)
   
3. How strict or loose it is to borrow (credit & banking policies)
   

When markets are growing, 1 + 2 usually increase and 3 loosens. Things are going well. However, the caveat is that nothing grows forever, so at some point interest rates start to become unsustainable, which leads to less money flowing around.

When less money flows around - which means people spend less, which means demand drops - all that growth from investments and expansions and packing debt on the premise that things will continue to go well accumulates and markets dry up and prices go up.

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The Central Bank of Amudim's conundrum right now is that markets already dried up quite extremely when compared to the previous "golden ages" of the Homeland State of Beiteynu and the Neset itself. But the debt is still there.

So even if the CBA makes borrowing money cheaper to increase demand, there's not enough money flowing to make the rate cut efficient.

It can inject liquidity - but the problem is, the CBA neither has that kind of money anymore, nor can it borrow more.

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The solution? Dismantle and sell all that excess growth and supply that is no longer neither in demand nor being used. Which will lead to unemployment and, you guessed it, stagflation: rates will continue to go up, but with no growth.

What walks like a bailout and talks like a bailout - is probably a bailout.

@Neset