Saturday, December 20, 2008

If you ever needed proof that the New York Times was staffed by morons 
This is it.

Japan offers possible road map for U.S. economy.

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What do you mean? All good roadmaps should have the hazards and pitfalls clearly marked. Of course, if you think 'clearly marked' *isn't* synonymous with "the cartographic equivalent of reverse psychology" you may have problems...
It only took 'em two days to outdo their own ineptitude.
They're on to something, but they haven't moved it far enough. The trick to spur growth is to issue a NEGATIVE interest rate. Say -5% to start. That way when you borrow a thousand bucks from the fed, you'd only have to pay them back $950 next year. I'd borrow millions, and spur the economy to boot!

Sure, you think I'm being silly, but with the government doling out hundreds of billions of $s every few weeks, how bad would my idea actually be?
That's the net effect, frequently, when you take inflation into account, regardless!

There was a period in the 1970s when real interest rates...that is, interest rates adjusted for inflation, were actually negative!

The problem is that negative interest rates don't do much to spur the availability of credit. You can have a prevailing interest rate of minus 5 percent, but only 100 dollars available to lend in that instance, because who wants to lend money when it's guaranteed to lose money...even worse than putting it into a mattress!

Further, when the government does that, they absolutely rape senior citizens, pension funds (who rely on getting a reasonable return on their investable assets), and anyone who relies on a fixed income.

Negative interest rates occur from time to time. Indeed, they occured briefly last month, when the 10 year treasury was bid up higher than it's actual face amount, as investors fled risky securities looking for a safe haven.

But it's not sustainable, and has some pretty ugly ramifications.
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