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View Diary: The CBO may be good at math but they are terrible at economics (18 comments)

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  •  There is absolutely no historical connection (0+ / 0-)

    or correlation between low interest rates and HIGH inflation.  In fact, just the  opposite is true, although, the causality is not well established....

    Just look at the last graph provided in this link (there are a few of them)..... Its CPI (all items, yroveryr chg) plotted next to the effective federal funds rate.  You will see clearly that they rise and fall together.  If your statement were true about higher prices (inflation) being the natural result of lower federal interest rates....then we would see them with a negative correlation.  The Federal Govt is a net payer of interest, which is why many smart people say that the Fed actually cant control inflation with monetary policy since the higher the interest rate....the more money the Govt creates and supplies to the private sector (assuming all other domestic spending remains constant)......which is inflationary (assuming the economy is at or near full capacity)

    "The Earth is my country and Science my religion" Christiaan Huygens

    by Auburn Parks on Sun May 26, 2013 at 05:32:27 AM PDT

    [ Parent ]

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