Re: The Politics of Recession

["John O'Donnell" <jackodonnell@xxxxxxxx>]

Clifford Poirot wrote:

<<SNIP>>

> Even so, the more imporant target right now (and i believe the chief villain
> in the piece) is a FED wedded to hard money philosophy that has already
> slammed the brakes on the economy. An interest rate cut would have far more
> reaching and beneficial effect. It will probably have to be
> significant-ultimately completely undoing the last year and a half of hikes,
> and maybe even then some. It is an open question as to whether or not the
> FED will be willing to do this.

Right now the 10 year treasury rate, which is the rate with
the closest link to home mortgages, is near 5% while the ff
rate is near 6.5%. If the ff rate were reduced to 5% would
the 10 year treasury rate increase or decrease? Why? What
makes you so sure?

<<SNIP>>

> Government debts must be
> financed, and high debts that have little prospect of being paid back will
> lead to higher risk premiums on that debt (even for hegemonic powers such as
> the U.S.).

Why? And what debt must be financed? Is it the total debt?
The publicly held debt? Privately held debt? Foreign held
debt?
(See
http://www.stls.frb.org/images/publications/net/page17.gif
for the totals)

The answer may seem obvious if you wear your normal business
spectacles but the fact is that debt and deficit denominated
in the currency issue of the debtor have little to no
economic relevance.
(See http://www.geocities.com/CapitolHill/1067/canitbe.html
)

<<SNIP>>

--
			-- jbod

		Tax Privilege, Not People
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