I thought that video Gammon did was excellent. It got me thinking.
I don't always agree with opinions I read, but it does get the wheels in my mind turning.
I could be wrong, but I don't see them even being able to get to 5 or 6% rates. I've been saying that for a long time now. My reasoning is simply that it makes the price of money TOO EXPENSIVE for a world that's this indebted. it's definitely not sustainable over time without something breaking in a big way.
So, what are the implications for that to happen? Do financial institutions start going belly up? Do countries start defaulting? To do that IMO equates to them saying we're going to just drive the whole damn thing over a cliff and I can't see them doing that, unless they have some sort of other motive for doing so. That could be the case of course, who knows.
They're definitely between a rock and a hard place, but IMO they want to continue to inflate as much debt away as they can without having the politicians and electorate come to the conclusion, they don't have a clue.
IMO if the inflation numbers start falling to a more manageable level they could make that work. Problem is will the inflation come down enough? They're not even in the ballpark yet, so we'll see how that goes. If inflation remains elevated they have to stay hawkish and keep raising rates, which could prove to be disastrous
Remember inflation has never been controlled with rates LOWER than the rate of inflation, so their work is cut out for them. Even if inflation got down to 5 or 6% that where theoretically interest rates would have to go. We'll see what happens.
