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To: sourcery
You can do your own research from there.

I've been a "corporate banker" and currency risk manager since 1969 and have been following exchange rates and money markets since before the Dollar was floated in 1971 (August 15th by Nixon). I've done my homework and I'm still involved in the markets on a daily basis. Interest rates track to inflation nearly perfectly and exchange rates track to relative inflation nearly perfectly, statements to the contrary notwithstanding. When inflation got out of hand in the late 70's and early 80's, interest rates rose in tandem. Volcker had to tighten down on interest rates, hard, i.e. push them upward, to squeeze the inflation out of the economy. It worked. Inflation and interest rates have been declining for 20 years.

You have a case to make. Make it.

63 posted on 10/19/2003 7:44:48 PM PDT by Phaedrus
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To: Phaedrus
You have a case to make. Make it.

I said that interest rates are a function of inflationary expectations, credit risk and supply/demand of lendable capital. The Federal Reserve report I referenced says exactly the same. If a Federal Reserve report does not suffice, I'll add the following: The US government can borrow money at a lower interest rate than any other borrower, because the credit risk is perceived to be lower. Conversely, companies in economic trouble have to pay rates considerably higher than the Microsofts of the world do. And the spread between the rates that good risks and bad risks have to pay varies independently of inflation. You should know that. Case closed.

65 posted on 10/19/2003 7:52:36 PM PDT by sourcery (Moderator bites can be very nasty!)
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To: Phaedrus
You are obviously correct. Interest rates consist of risk-related rents on capital, plus an inflation premium. They have almost nothing to do with supply and demand for credit, except for possibly very short-term fluctuations.

Most of the people pontificating on this thread don't know what they are talking about, particlarly the gloom and doomers like arete and the author of this article. For some reason I got on Weiss' mailing list several years ago and I keep getting solicitations to subscribe to his newsletter. He habitually presents a falling-sky scenario, which I guess fuels the predilicitions of the crowd he appeals to.
70 posted on 10/19/2003 8:07:33 PM PDT by B.Bumbleberry
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