John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (17511)	1/4/2016 9:07:07 PM
From: The Ox	2 Recommendations Recommended By 3bar John Pitera Read Replies (2) of 33421

FED officials are much like everyone else. If we were to see inflation approaching 3 or 4 %, they'd all be saying "maybe 2% isn't locked in stone". That’s because the *equilibrium interest rate* -- the rate after inflation that neither expands nor contracts the economy -- *has fallen. Fischer cited a number of possible reasons for the drop in what economists dub “r,” including slower productivity growth and excess savings in emerging market countries. I don't agree with the basic premise that all governments need to back off and force austerity on their populace. I think this will end up being a very short term phenomenon. I think there's a trend in the Central Banks to view this as a good move and only in hindsight will they see that the Austerity movement has caused much more pain than gain. If all currencies are racing to the bottom, trying to "out deflate" the world, those same countries would have been better off spending like crazy and borrowing to the hilt. Later, you can pay back your debts with substantially deflated currency.

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