OT (Macroeconomics, Federal Reserve Paper, Greenspan)
The parallels, ten-year lagged, of Japan to US are just stunning.
The parallels are remarkable. No doubt about it whatsoever. The only thing the paper keeps on saying, however, is that (something to the effect of) Japan cut rates and kept rates low from 93-95, it would have prevented the runaway deflation situation they're in now.
Japan took 5 years since the collapse of the Nikkei to drop rates:
In response to the slowdown, Japanese economic policy clearly loosened. The overnight
call money interest rate declined from a peak of 8.2 percent in March 1991 to 2 percent in March
1995, and declined further to ½ percent by October 1995.
It took Greenspan 21 months to drop rates to 1.75% since March 2000. Which means we're the guinea pigs testing this little theory. That's the only difference I can see that breaks the parallelism. And if dropping rates, and keeping them there doesn't work.. well, we're in trouble.
And if this does work - we see large magnitudes of inflationary growth. Take your pick. |
