Thursday, July 13, 2017

Interest charges rise and inflation drops

The greater the interest charges the less we do price discovery and inflation drops.  Real growth also drops.

It is in the chart, take a look, red rising and blue dropping.  So why are we still listening to  quotes from the Book of Magic Walrus, like this economist:

I believe it is clear that the main reason the economy has been growing slowly since the financial crisis is overly tight monetary policy. Inflation has been chronically low. The unemployment rate now admittedly looks good, but this is primarily due to workers leaving the labor force. The employment rate has not recovered, as can be seen below. Certainly, things are improving, and things will look better if you limit to prime-age adults, but then again, you could argue that the prime-age employment rate numbers might look better than usual due to baby boomer retirement. Wage growth is also slow, pointing to a still-weak labor market, nearly 10 years after the recession began. And, yet, despite that, the Fed has taken five consecutive tightening actions in terms of ending QE and raising interest rates.
Raise rates and the rate stream favors member banks who can crate inflation.  Lower rates and  the stream favors government which generates housing and medical inflation. The central bankers are in a squeeze after subsidizing government debt for eight years.

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