tag:blogger.com,1999:blog-6399730406480392183.post7092381294425430637..comments2024-03-27T11:18:34.222-03:00Comments on Viable Opposition: The Painful Impact of Ultra-Low Interest RatesA Political Junkiehttp://www.blogger.com/profile/03342345936277964422noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6399730406480392183.post-36697441318829112832012-06-20T08:36:57.542-03:002012-06-20T08:36:57.542-03:00Thanks for your input Paul. Interesting point abo...Thanks for your input Paul. Interesting point about writing down nominal debt. I agree about Japan - they've had nearly a decade of QE and look where that has got their economy!A Political Junkiehttps://www.blogger.com/profile/03342345936277964422noreply@blogger.comtag:blogger.com,1999:blog-6399730406480392183.post-73323400355697462902012-06-20T08:01:49.541-03:002012-06-20T08:01:49.541-03:00This is 'financial repression' and is not ...This is 'financial repression' and is not new. That fixed income savers suffered in the past when governments ended up with too much debt is clear from the past. In an earlier age, the sovereign merely defaulted. In the 20th Century--and now again in the 21st Century--they engaged in keeping interest rates artificially low so that there was a negative real rate of return. As debt is mostly in nominal terms this is a write down in real terms. As you correctly point out, this is hurting many sections of society and, possibly, also hindering an economic recovery.<br />An interesting hypothesis is doing the rounds that firms, who might be in a position to invest, are holding off because they are suspicious of the unnatural economic conditions. So -- as you rightly point out -- central banks acting to cut interest rates to near zero and engaging in QE might be part of the problem. And it is not as if we do not have a precedent of the perverse effects of financial repression in Japan, which has flatlined since its economic bust, nearly a generation ago!Peternoreply@blogger.com