Monday, 7 February 2011

Comments on economies and inflation made by readers and bloggers

I found the comment, a long one, by @right, on the following sight to be well though through!

http://www.businessinsider.com/governments-food-price-inflation-2011-1#

So I responded:

The comment by @right is very well thought out. The present economic solution paths assume at some point debt will be repaid and the fact is that much of the new stuff is short term debt, so someone has to borrow short to lend short which brings everything to a head. Perhaps, the short loans are borrowed long which makes the overall Market more stable, we would assume. But even in borrowing long there are likely to be rising interest rates. The beauty of it all is that a very small rise in interest rates can have now a very big impact. Later on the rise in interest rates to get the same impact will have to be that much greater. So the prospect of very high interest rates is a very real prospect in order to slow down inflationary pressures. Yes, the world will grow, but it will be subject to a balancing act of policies aimed at mitigating the effects of higher inflationary rates against higher interest costs. Unemployment wil rise as people move into services and away from commodities. The Internet will produce a services explosion on almost every front, so get busy with your computers if you want a job!


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