You are viewing a single comment's thread.

view the rest of the comments →

0
1

[–] coles-law 0 points 1 point (+1|-0) ago 

Can someone correct me if I'm wrong? What I suppose this means:

Raising rates makes borrowing harder so buying houses and refinancing mortgages are more costly.

Raising rates also decreases money supply because loans are harder to come by. Any foreclosure spree / calling in loans will contract the money supply further.

When the money supply is lowered, the economy shrinks because there is less liquidity between producers and consumers. This causes a recession or depression depending on the severity of the contraction. Markets like housing and stocks will follow, accelerating the decline.