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Not to get too conspiracy theorist, but I think people need to start considering the idea that the forces that be may be trying to steer the economy in the direction of a low interest rate recessionary environment.
It might not even be intentional. Could be nothing more than a bunch of people at the Fed throwing up their hands in frustration saying “growth just isn’t going to happen no matter how hard we try, so the least we can do is keep borrowing costs down for the foreseeable future.”
leftcoaster,
who truly gets to borrow the money ?
Well, technically no one, because the government is just going to spend whatever they want to spend. Or at least, I think that’s the direction you’re going in with that question…
To further qualify my point…low interest rate recession should entail that the credit-worthiness of the US won’t be called into question. Why would it? They have the perfect model to base it off of in Japan. The government could continue spending whatever it wants as there will be no threat of inflation (you can argue about real inflation all you want, but I don’t think that really influences spending decisions). Borrowing for corporations should stay at record lows, insuring their survival. And ultimately the powers that be decide to just try and wait it out.
It would definitely be taking the easy way out, but when doesn’t the government/fed take the easy way out?
Leftcoaster,
that model works until the greenback is no longer the worlds fiat currency…signs of moving away from greenback hegemony have been surfacing for a number of years now…
when we “eventually” go back to the gold standard, the usd, will then remain reserve status.it’s being prodded along by the countries that are not our allies. the problem i see,is if that were to happen, too many people would have a whole lot of money, and thats the exact reason of what scares the rich, and most certainly worthless POS politicians especially in america,and thats what they dont want!
Cronkite,
Seems to work for Japan and they aren’t the worlds reserve. And by work I mean they can survive with no growth to speak of and no growth on the horizon. Might not work forever, but betting on something that may last 10+ years is not a very good bet.
Drummerboy,
I think the idea of going back to the gold standard is a little silly. Of course that doesn’t mean it wont happen. The idea of backing your currency by the full faith of your economy is simply economic evolution. That idea, I think, is very appealing to high growth emerging economies…which most countries that are not allies of the US would be characterized as.
so tell me, when japan,who has now edged closer to china, russia, and other mena countries, in seceding from the usd for settlements in oil and trade and leaving the u.s. pretty much isolated,then what. other super power countries want better “faith” from the u.s gov toilet paper that they now hold.high growth emerging economies dont give to figs about the usa,dont you see.
Leftcoast – Japan works because their population is so obedient that when the government says buy our bonds at .1% yield they all pile in. Just wait until they have to sell those bonds for much less than they bought them to live in retirement.
Also does 20 years of no growth and deflation sound like an attractive option?
Drummer is also right about oil. When the US can no longer buy oil in USD inflation will go nuts.
I don’t think 20 years of no growth and deflation sounds like an attractive option, I just think that if push comes to shove policy makers will drive the US in that direction because it gives the US the highest likelihood of remaining the reserve currency and the global super power. Who’s going to outpace the US in an environment like that? China has to stop building ghost cities and would have to stop accepting USD for it’s exports. Everyone else is just too small and will get dragged down in the deflationary vortex.
I’m not too concerned about oil. Get back to me when China stops accepting USD for it’s exports. The US is a net exporter of petroleum products and Canada currently sells nearly 100% of its oil to the US because they currently don’t have the ability to sell it to anyone else. Sure they’d like to sell some to China in order to diversify, but if push comes to shove they’ll come back to the US. Canada has next to no defense budget because the US essentially takes care of it all. The day oil isn’t denominated in USD is the day you see a natural gas pump pop up on every street block overnight.
I don’t deny your guys listed scenarios could play out, I just think people who have been betting on raging inflation have been so wrong for so long, I can’t believe that this time will be any different.
maybe I should qualify that by saying bets on inflation as in bets on inflation due to a decline in the credit worthiness of the US, which has been probably the worst trade of the last 30 years. But rates have to rise eventually, right?
Of course bets on inflation in other markets have played out very well.
you wont,you’ll call a plumber to your house,or your nat gas provider and they will install the pipe, and the apparatus necessary to fuel your own vehicle. there will be nat gas stations, for rigs. they dont want to admit that T. bone Pickens is so right, for so long.