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 Interest Rate

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PostSubject: Interest Rate   Sun Oct 27, 2013 8:37 pm

It is my understanding that capitalist economies with centralized banking systems are controlled by the interest rate on loans. The rate is lowered when the economical growth is stagnating, it is raised when the economy is growing too fast.

I want to thoroughly understand this rationale.

a) why is economic growth a given, or must it be a given to sustain an acceptable standard of life?
b) how is economic growth defined?
c) in which case is the economy growing too fast?
(-what are the theoretical criteria,
-what are in general and have been in practice real world outcomes,
-what kind of dynamic signifies a 'burnout'?)
d) who/what has historically determined the interest rate?
e) (how) is the interest rate, in any way, directly or indirectly, determined juridically?
f) how is a decision to set an interest rate applied?
g) ..

I am aware that the Federal Reserve determines the rates in the United States, I assume that the European Central Bank controls them in Europe - But what I do not understand is why this is determined centrally -- properly, the question is when and under which circumstances this  this came to be

So I can continue:

g) what was the first centralized banking system?
h) which countries do not have centralized banking systems?

 

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