Comments on: Negative Real Interest Rates ‘Round the World Bode Ill for Inflation

By: Francois

Francois — Tue, 03 Jun 2008 05:25:00 +0000

Is it just me who think a legion of Paul Volcker clones spread into the central banks of the world could help?

Sort of “Attack Of The Clones” Financial Edition

By: PrintFaster

PrintFaster — Tue, 03 Jun 2008 00:20:00 +0000

Thanks for the pointer on the nber.org paper. The abstract has a very trenchant point:
"Second, the data go a long ways toward explaining the puzzle of why countries so often default on their external debts at seemingly low debt thresholds."

What they are saying is that the US will default on Chinese and Japanese debt.

Good luck to them if they think that they can collect anything on US sovreign debt.

By: steelhead

steelhead — Mon, 02 Jun 2008 23:43:00 +0000

Geez, you all talk like inflation is bad or something. Come on folks, if we get inflation cranking real good we could pay that $10 Trillion federal debt they’ve run up with a boatful of hard red winter wheat and Microsoft software.

In the event you don’t get it, by setting the overnight target rate well below the inflation rate, the Federal Reserve Bank is out to debase the dollar – big time. And its working. But, not to worry. Global financial collapse will solve this problem – in about 5 years. Between now and then, good luck holding onto your money.

By: Lune

Lune — Mon, 02 Jun 2008 21:01:00 +0000

I’m not a financial sector expert, but could anyone explain why China shouldn’t impose capital controls to reduce speculation and short-term currency inflows? Exactly what would the downside to a regulated and closed exchange regime be? And is that downside more than the downsides of the current system?

By: Scott

Scott — Mon, 02 Jun 2008 15:20:00 +0000

How about Japan’s easy money policy? That country has had absurdly low interest rates for a very long time as a result of BoJ attempts to reflate Japan’s growth. That has to have contributed to this problem…the “carry trade” has certainly been a source of investment excesses.

By: Scott Finch

Scott Finch — Mon, 02 Jun 2008 15:00:00 +0000

i was reminded of an interesting paper titled “The Forgotten History of Domestic Debt”. It may be found at nber.org under working papers.

By: Richard Kline

Richard Kline — Mon, 02 Jun 2008 07:29:00 +0000

I can only strongly concur that coordinated macro-monetary policies are desperately needed. China’s determination to keep its currency low and the Fed’s unilateral plunge to severely low rates—2% where real inflation is likely closer to 7% than the reported 3.9%—are both profoundly destabilizing acts for the global financial system.

Time was, one function of the lamentable IMF and World Bank was to enforce a certain uniformity of action upon most large economies engaged in international trade. Of course their system was rigged to embed large American advantages, which were themselves in place due to the disproportionate size of the US economy and capital markets. Now, the US is a much smaller share of the global financial system, and emerging players have suffered so many negative consequences due to malfeasant and frankly incompetent, ideologically motivated IMF and World Bank destruction that ‘non-cooperation’ has become the norm. Well, we see where this is getting us all, now: everybody’s phonying their numbers to boost headline growth at the expense of the capital markets, which in turn act with reckless disregard for the consequences of their actions as well.

Interesting times, indeed . . . . Like it or not, and clearly no high level policy maker or plutocratic speculator likes it, we are all so interlinked that effectively we are in this thing together, either mutual aid or mutually assured impoverishment: One World, Love It or Leave It.