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Well, this is sort of what the fed is trying to get away from because it is mostly true when inflation is too low and interest rates are stuck at zero which cau
by BenoitEssiambre 5y ago
Well, this is sort of what the fed is trying to get away from because it is mostly true when inflation is too low and interest rates are stuck at zero which causes gridlocks in the private markets. In the current situation, signs of these gridlocks worsening or improving cause large swings.
Once inflation is high enough that we can get away from the zero lower bound, government paper becomes less of a desirable asset and stops being hoarded and displacing and blocking investment in the private markets. It's a return to markets having room to breath instead of being dominated by monetary actions.
As long as it doesn't go too far the other way...