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Politics : Ask Michael Burke

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To: Earlie who wrote (71380)12/3/1999 12:38:00 PM
From: Freedom Fighter  Read Replies (3) of 132070
 
Earlie,

I'm slowly coming around to the view that the government inflation stats are almost totally irrelevant as far as interest rates go.

I think interest rates generally reflect the supply and demand for capital. The inflation component, whether it is measured properly or not, is part of the demand side of the equation.

Summed up, I think there are leveling effects between, savings, investment, "nominal" GDP growth, expansion of bank credit etc... that force interest rates around even if we have no clue what the real inflation rate is.

Wayne
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