This is the Dan Oakes Politcals and Economics blog, his space to express his somewhat opinionated views.
The opinions of Dan Oakes do not necessarily reflect mine. This is his space.
Interest RatesJune 11, 2009Josh is the first in our group to pay the "stimulus" tax. Nominal interest rates are climbing due to rising inflation expectations. Substantial federal budget deficits fuel the inflationary fires. Blame the "stimulus" and an unrestrained budget. Add inflation-taxes to the trillion dollars in deferred taxation. Low inflation is ideal. It lightly chips away at wages (A good thing because most people believe they are underpaid. Most people also believe they are an above average driver). Too much inflation is bad because people waste productive energy reacting to price changes.Changing inflation is also bad because it creates uncertainty. To illustrate the above dynamic, take Josh's recent mortgage-fun. The failure to renegotiate the mortgage creates no direct economic loss (his loss is the bank's gain). The economic loss is the time he wasted chasing inflation. A second loss comes from more volatile inflation, which forces lenders to further hedge their inflationary bets through higher mortgage rates. Josh was the first in our group to pay the "stimulus" tax. The rest of us will pay other inflation taxes. In a few years, we'll all pay the deferred "stimulus' " taxes. http://www.ft.com/cms/s/0/68ca2d04-55f2-11de-ab7e-00144feabdc0.html
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