Question! Is there correlation between low interest rate economies and low inflation or even into deflation?
The one economy that seems to scream out this factor is the Japanese. They have a debt to GDP ratio of Two Hundred per cent but do not pay for this debt with a bank rate of zero or even a minus level. If Japan had to pay an interest rate of say 4% I wonder how much it would cost them and what value could the Yen trade at?
So where does Japan find investors to purchase their debt and pay for it themselves, after all they are not getting any return for their investment. Could it be that Japanese banks are taking a nationalistic view, if so where does their money come from? Has the International Financial Community realised that in fact Japan is bankrupt? Also if they remove support for the Yen it will not be 100 to 1 but 100,000 to 1 thus the pack of cards will collapse. If you look at the fundamentals, the Emperor has no clothes on!!
I therefore wonder if the Central Banks decided to use “quantative easing” as a proxy for interest rates? The problem here is whereas interest rates go right down through the economy, Q.E., stays at the top. You can see this quite clearly as the top 1% get richer leaving the middle and lower workers along with those who are retired nowhere to invest their small savings and so get a return.
Speaking as a pensioner, nobody is giving interest on savings. Instead you are incentacised to spend every penny, but in real life everybody needs savings. Remember it is the Central Banks who put up interest rates.
In a real economy there are real interest rates, inflation and growth. In a false economy there are negative interest rates, deflation and stagnation.
There is still time to change!!!
© Michael Douglas Bosc
