Sunday, March 15, 2009

Unintended Consequences

The government gave the banks large amounts of money to encourage lending and spur the economy. The large influx of funds, though, decreased the banks' need for deposits and thus, lowered the interest rates offered to the general public normally used to encourage increased deposits. Now, with the lower interest rates, the general public's funds are no longer generating interest - their money is not making them money. So, with this loss of income, people are being more careful about spending money. . . It makes me wonder how this was intended to work and where it went wrong.

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