===== Original Message From "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx> =====
Fed economist Thomas Laubach estimates in a recent paper that every
additional $100 nillion increase in projected annual budget deficit adds
one quarter percentage point to the yield on 10-year Treasury bonds.
The Fed's traditional position is that budget deficits raise longterm
interest rates, over which Fed monetary policy as currently constituted
has little control.
What nonsense. Just look at Japan as an example where large government decits
over almost a decade has lead to (almst) zero interest rates. It all depends
on what the monetary autorities do -- and in an international free capital
movement world -- what international bankers (and their customers) liquidity
preference are.
palu
Paul Davidson
Editor, Journal of Post Keynesian Economics
University of Tennessee
SMC 503
Knoxville, Tennessee 37996-0550
office phone #;(865)974-4221; office fax# (865)974-1686 or (865)974-4601
home phone and fax # (865)692-0802
email pdavidson@xxxxxxx
http://econ.bus.utk.edu/davidsonextra/Davidson.html