[I hope this isn't the second message on this subject.]
I wrote:>>If the rich countries coordinate monetary policies to prevent this scenario
[the
US grabbing demand from other countries], then interest rate cuts won't affect the
demand
for U.S. goods via exchange rates. It would have to be by a generalized reflation, by
most
of the rich countries.<<
Chris writes: > This is likely. But the sequence of who reduces rates most, and in what
order, may create further instabilities.<
right.
> It is no longer clear as it was after the Asian financial crisis, that Europe and
>Japan
have to cut rates in time with the USA to allow the USA generously to become the
spender
of last resort.<
why? what's so generous? the US is getting deeper in debt as a result.
> BTW isn't the state lowering of interest rates also a form of destroying capital? -
>that
is by diluting it so it can no longer command the same interest rate? <
lower rates lead to higher prices of existing bonds, so that their owners hardly lose.
But
new money will be rewarded by less interest. I don't get how this destroys capital,
especially since it might prevent deflation.
Keynes' "euthanasia of the rentiers" scenario seems ruled out by the way in which the
central banks are controlled -- mostly by bankers.
>How exactly is it done?<
you need to know how monetary policy works? The Fed buys bonds, which raises their
price
and lowers rates.
> It is high time they addressed the needs of the world economy as a whole and not just
that of the metropolitan centres of capital. It is even getting to the stage where in
their own self interest it would be more rational to do that.<
I hope you're right. But I'm afraid that they're not going to do so until there's
political pressure on the ruling classes of the world (and on the emergent world ruling
class) from the workers of the world (and other nonestablishmentarian forces).
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