Re: Fed vs White House

[pdavidso <pdavidso@xxxxxxx>]

>===== 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