Re: King of the Horizontalists ?

[Greg Nowell <GN842@xxxxxxxxxxxxxxxxx>]

Yes, and in a keiretsu style system the big bank cartels are virtually always
borrowing short from the govt and lending long to their own industrial members..

GGard97342@xxxxxx wrote:

> In a message dated 26/01/2000 16:15:38 GMT Standard Time, lprochon@xxxxxxxx
> writes:
>
> > Second, there is little and only indirect relationship between interest
> rates
> >  and the money supply, surely we know that by now!
> >
> Surely there is a kind of relationship, but it has not been generally
> recognised because it does not accord with standard monetarist theory.
> ("Palmer's Principle" and the like.) It seems to be recognised in Germany, to
> judge by an incident when Gavyn Davies of Goldman Sachs was one of the
> British Chancellor's "Six Wise Men". Davies said that the German M3 was
> growing and the Bundesbank should raise interest rates. The Germans replied,
> "No. When interest rates are low, big industrial borrowers will borrow long
> in the bond market, but when they are high they will borrow short from the
> banks while they wait for interest rates to fall. High interest rates
> therefore cause M3 to rise." This was a bit of a simplification as the
> interest rate curve also comes into the equation, but what they were saying
> is largely true. Moreover it is standard teaching in investment theory. For
> some reason, what students of investment theory have been learning for
> centuries has not been communicated to monetarist economists.
>
> Geoffrey Gardiner

--
Gregory P. Nowell
Associate Professor
Department of Political Science, Milne 100
State University of New York
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