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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: NOW who wrote (1832)5/25/2003 8:22:40 AM
From: UnBelievable  Read Replies (1) of 4905
 
Not If Wages and Prices Go Up

That's why the solution is price inflation.

Rates can then go up but not as high as the rate of inflation so you can maintain zero (real)interest rates while still allowing inflation to monitize the debt.

In the end it doesn't work because the negative real interest rates depress capital accumulation and all real (not by the Fed lending).

The hope is that as the bad debt gets worked out that interest rates can be raised to positive. But this will only happen if the majority of the debt has been eliminated quickly which only happens if a fairly high rate of inflation is allowed to persist for some number of years.

But the whole strategy is based upon everyone not recognizing the negative real interest rates and cantinuing to participate in the capital mearkets. Otherwise absolutely all lending will only be from the Fed.
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