What if interest rates go to 13%?

[jficquette]

[quote=kewp]The 70’s prove that the Fed can overpower recessionary deflation and cause something worse. Oddly, I hope I’m wrong.

You almost certainly are.

The dominant economic trends are all deflationary. All the Fed printing is doing is keeping the banks *barely* operational. There isn’t enough excess liquidity available for price/salary inflation.

All our past over-consumption basically amounted to money-burning. Foreclosures, bankruptcies, unemployment, credit card defaults etc. are all the equivalent of dollar destruction and ultimately deflationary. The Fed printing isn’t even close to keeping up.

[/quote]

Net new money isn’t created unless its borrowed. If no debt is in involved then its simply cash to cash.

The Fed doesn’t print money. It sets conditions to influence how much of it is borrowed. Its the borrowing that expands the money supply.

Low rates won’t help anything if people are not willing to borrow it.

John

[kewp]

The Fed doesn’t print money. It sets conditions to influence how much of it is borrowed. Its the borrowing that expands the money supply.

You could not be more wrong.

http://en.wikipedia.org/wiki/M1_(economics)#United_States

[kewp]

The Fed doesn’t print money. It sets conditions to influence how much of it is borrowed. Its the borrowing that expands the money supply.

You could not be more wrong.

http://en.wikipedia.org/wiki/M1_(economics)#United_States

[kewp]

The Fed doesn’t print money. It sets conditions to influence how much of it is borrowed. Its the borrowing that expands the money supply.

You could not be more wrong.

http://en.wikipedia.org/wiki/M1_(economics)#United_States

[kewp]

The Fed doesn’t print money. It sets conditions to influence how much of it is borrowed. Its the borrowing that expands the money supply.

You could not be more wrong.

http://en.wikipedia.org/wiki/M1_(economics)#United_States

[kewp]

The Fed doesn’t print money. It sets conditions to influence how much of it is borrowed. Its the borrowing that expands the money supply.

You could not be more wrong.

http://en.wikipedia.org/wiki/M1_(economics)#United_States

[barnaby33]

EconProf, what always is missing in every conservative description of the 80’s is how Reagan got us out of that nasty recession.

1)Volker cranked up interest rates
2)The economy contracted
3)Reagan caved and borrowed to reflate the economy.
4)Borrowing is just a way to temporarily export your inflation. Reagan was aided and abetted by a Democratic congress, but the only way he could reflate the economy was through some form of inflation. The playbook is always thus.

[barnaby33]

EconProf, what always is missing in every conservative description of the 80’s is how Reagan got us out of that nasty recession.

1)Volker cranked up interest rates
2)The economy contracted
3)Reagan caved and borrowed to reflate the economy.
4)Borrowing is just a way to temporarily export your inflation. Reagan was aided and abetted by a Democratic congress, but the only way he could reflate the economy was through some form of inflation. The playbook is always thus.

[barnaby33]

EconProf, what always is missing in every conservative description of the 80’s is how Reagan got us out of that nasty recession.

1)Volker cranked up interest rates
2)The economy contracted
3)Reagan caved and borrowed to reflate the economy.
4)Borrowing is just a way to temporarily export your inflation. Reagan was aided and abetted by a Democratic congress, but the only way he could reflate the economy was through some form of inflation. The playbook is always thus.

[barnaby33]

EconProf, what always is missing in every conservative description of the 80’s is how Reagan got us out of that nasty recession.

1)Volker cranked up interest rates
2)The economy contracted
3)Reagan caved and borrowed to reflate the economy.
4)Borrowing is just a way to temporarily export your inflation. Reagan was aided and abetted by a Democratic congress, but the only way he could reflate the economy was through some form of inflation. The playbook is always thus.

[barnaby33]

EconProf, what always is missing in every conservative description of the 80’s is how Reagan got us out of that nasty recession.

1)Volker cranked up interest rates
2)The economy contracted
3)Reagan caved and borrowed to reflate the economy.
4)Borrowing is just a way to temporarily export your inflation. Reagan was aided and abetted by a Democratic congress, but the only way he could reflate the economy was through some form of inflation. The playbook is always thus.

[EconProf]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.
Also helping was the public’s becoming convinced that we were not in for runaway inflation. All those inflation hedges fell, cost-push inflation receded, and real investment in productive activities grew. The dragon of inflationary psychology had to be slayed.

[EconProf]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.
Also helping was the public’s becoming convinced that we were not in for runaway inflation. All those inflation hedges fell, cost-push inflation receded, and real investment in productive activities grew. The dragon of inflationary psychology had to be slayed.

[EconProf]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.
Also helping was the public’s becoming convinced that we were not in for runaway inflation. All those inflation hedges fell, cost-push inflation receded, and real investment in productive activities grew. The dragon of inflationary psychology had to be slayed.

[EconProf]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.
Also helping was the public’s becoming convinced that we were not in for runaway inflation. All those inflation hedges fell, cost-push inflation receded, and real investment in productive activities grew. The dragon of inflationary psychology had to be slayed.

[Author]

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