Tweet
Re: Fed Injects $41 Billion in Liquidity
My suspicion is that the ECB and BoE are looking at China as the proximate cause of the problem.
It is because China is propping up the dollar (seems counter-intuitive to what we see, but it is true) and causing a ripple effect across the whole currency world.
The previous 'savings glut' is now clearly shown to be nothing more than China CB intervention abetted by neighbors in Asia.
The interesting part is that while high(er) interest rates would ameliorate inflation on commodity imports due to currency exchange rate effects, it could accelerate internal job losses as exporters are killed and businesses/individuals in general are decimated by higher borrowing costs.
So the net effect might be to keep prices stable but kill off hundreds of thousands of jobs.
Therefore why not attack the root cause of the problem?
My suspicion is that the ECB and BoE are looking at China as the proximate cause of the problem.
It is because China is propping up the dollar (seems counter-intuitive to what we see, but it is true) and causing a ripple effect across the whole currency world.
The previous 'savings glut' is now clearly shown to be nothing more than China CB intervention abetted by neighbors in Asia.
The interesting part is that while high(er) interest rates would ameliorate inflation on commodity imports due to currency exchange rate effects, it could accelerate internal job losses as exporters are killed and businesses/individuals in general are decimated by higher borrowing costs.
So the net effect might be to keep prices stable but kill off hundreds of thousands of jobs.
Therefore why not attack the root cause of the problem?
Comment