News
BOJ to discuss yield curve control tweak to allow rates over 0.5%
TOKYO -- The Bank of Japan will discuss tweaking its yield curve control policy at a policy board meeting Friday to let long-term interest rates rise beyond its cap of 0.5% by a certain degree, Nikkei has learned, in what would be a shift toward a more flexible policy approach. Under its yield curve control, the central bank buys large quantities of Japanese government bonds if 10-year yields look likely to go beyond its allowable range of 0.5% below or above zero, resulting in market distortions. The proposed change would keep the rate ceiling, but allow for moderate rises beyond that level.
Private Corporations Don't Cause Price Inflation. Governments Do
Interventionists always blame inflation on everything and anything except the only thing that makes aggregate prices rise: Issuing more units of currency than the real demand. Seller inflation is the same excuse and fallacy as cost-push inflation. A way to confuse citizens and assign causation to something that cannot make aggregate prices rise. Let us debunk some myths. No corporation or conglomerate can make aggregate prices rise. Some neo-Keynesians blame corporations for price increases, but that makes no sense. If corporations were able to make aggregate prices rise, the United States would experience incessantly high rates of price inflation.
Fiscal Dominance and the Return of Zero-Interest Bank Reserve Requirements
As a matter of arithmetic, the trends of US government debt and deficits will eventually result in an outrageously high government debt-to-GDP ratio. But when exactly will the United States hit the constraint of infeasibility and how exactly will policy adjust to it? This article considers fiscal dominance, which is the possibility that accumulating government debt and deficits can produce increases in inflation that "dominate" central bank intentions to keep inflation low. Is it a serious possibility for the United States in the near future? And how might various policies change (especially those related to the banking system) if fiscal dominance became a reality?
Do High Interest Rates Fix High Inflation?
In prior articles and newsletters, I’ve explored the causes of consumer price inflation over time. In short, the rate of consumer price inflation in an economy comes from a combination of 1) money supply growth and 2) significant changes in productivity and/or resource abundance. Periods of fast bank lending or large monetized fiscal deficits (and thus rapid money supply growth) tend to create inflationary environments, while periods of fiscal austerity and/or private sector deleveraging events (and thus slow money supply growth or outright money supply contraction) tend to create disinflationary or outright deflationary environments.
From Joe
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