Friday, October 16, 2015

Keep interest rates zero bound and ensure another crash. It is causing all the volatility, damaging investment and reducing wages. Eventually economies will hit the buffers and will have nothing to respond with...The financial services "industry" cannot function indefinitely (or even for much longer) with interest rates this low. Savers must get some sort of reward for saving; they shouldn't, at least, be penalized - seemingly without end - for saving. The insurance business, to give just one example, is already warning of trouble ahead.  The IMF should be reminding policy-makers that interest rates need to return to a "normal" rate - say 3% - as speedily as possible. If our systems of production, distribution and exchange, as presently organized, of are incompatible with interest rates in the 3% range, then it is the way we organize those systems of pde that needs to change.  A more sensible policy for the IMF to pursue would be to set a target of, say, 3% interest-rates across the "advanced" world by 2020, and then work back from that target to determine what changes to our systems of pde are needed, now, to enable them to sustain those rates.  Low interest rates have simply bought policy-makers time - time that has been mostly wasted...The dance at the top of the slide disappoints and this bogie's chorus of dissentious staccato rattles the teeth. The abrupt end of this amusement ride is near when central bankers' control levers are stripped clean. Central bankers saved the world, alright,... saved it for the tax man. A plea from central bankers to governments around the world to further impoverish their citizens to save their sorry arses or government's debt will be called in is the message. Sound money is bad and debt is good are the new speak from the MOT. No amount of rope will rescue this...We are now in a Catch-22 situation. If interest rates are kept low, the huge mountain of debt will eventually cause a crash. If interest rates are raised, many people will be trapped by increases in mortgage rates, loans etc. and so the economy will collapse because people will stop spending on all but essentials (and some won't be able to afford those). So what's the solution? I believe the capitalist system is disintegrating and we need a new economic model - not communism, but a mixed-economy model that has fairness, equality and justice as its basic principles, with real and transparent accountability systems. Surely, humans have the creativity for such a model. The most difficult problems will be political will and wresting the wealth and power from the global elite.

No comments: