Thursday, February 4, 2010

The effect of government crowding out on interest rates

Interest rates, ultimately, tell us the growth of inventories. If government engaged in activities that reduce our ability to grow inventories, then interest rates would drop. Bad government causes deflation.

Is bad government causing the ongoing deflation? An economy suffering constraints wants the constraints relieved, and ultimately that means government restructures along with the other sectors. Congress trying to restore the past is likely to cause deflation.

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