Please enable JavaScript.
Coggle requires JavaScript to display documents.
ECONOMICS - Coggle Diagram
ECONOMICS
BORROWING
Has risen in each economic cycle
Even when end of cycle hits and recession occurs, along with deleveraging, it doesnt clear out all the accumulated debt
This is accompanied by ever lower interest rates as governments aim to start investment early each time (so equilibrium rate never gets chance to reset)
-
Total debt therefore just continues to accumulate
Only way this can be controlled is through inflation
Reducing people's wealth t reduce the value of their debt
Like the Great Depression, this recession sees ultra low interest rates and a concomitantly low money multiplier
so, the money supply doesnt increase as much as it otherwise would or should
Monetary policy has effectively run out of steam - pumping more money in only props up asset prices - it doesnt fuel recovery
Yields likely to be held below prevailing inflation rate for a long time (eroding value of the bonds issued)
QUESTION
WHOW HIGH WILL THEY ALLOW INFLATION TO GO BEFORE THEY RAISE INTEREST RATES TO CONTROL? I.E. HOW QUICKLY WILL THEY WANT TO DEVALUE THE DEBTS
DEFINITIONS
Reflation is a fiscal or monetary policy designed to expand output, stimulate spending, and curb the effects of deflation, which usually occurs after a period of economic uncertainty or a recession
-
-