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We have not seen inflation. But we're seeing slow growth and negative interest rate. These are signs of diminishing returns. The market has lost its check-and-b
by dnprock 7y ago
We have not seen inflation. But we're seeing slow growth and negative interest rate. These are signs of diminishing returns. The market has lost its check-and-balance. Bond and lending were supposed to carry risk and skin in the game. Right now, overall growth is delivered through the Fed pumping money. There is no check-and-balance.
With this crisis, governments will likely pump more money. That'll distort the market further.
- aeternum 7y agoWhat we've seen throughout history is that economies are typically ruined by two things: 1) Governments or central banks printing or issuing (often not physically) too much money, resulting in inflation that spirals out of control. 2) Governments, central banks, individuals, businesses hoarding money due to fear or other reasons, resulting in deflation that spirals out of control. Those two are a form of check & balance. The thesis that most central banks now use is that if we can keep inflation steady, then we will have relative economic stability. The interest/lending rates are simply tools through which inflation can be moderated.