In this week's _The Nation_, Jamie Galbraith says:
<quote> By all accounts, the Fed is poised to raise interest rates, in a wholly symbolic anti-inflation gesture. If the logic of this escapes you, don't worry, there isn't one. The move is just a concession to the Fed's internal lobby of right-wing economists and pleaders for the banks and bondholders, who always want higher interest rates and who like to invent inflation threats to justify them. <endquote>
It's not the first time I've heard this idea that bondholders are the force behind higher interest rates. But why is the bond market is always said to "rally" when interest rates go down, and said to take a hit when they go up? That makes it seem like bondholders would always want *lower* interest rates to increase their capital gains.
Where am I going wrong? What is the easy solution to this seeming paradox?
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com
WESTERN CIVILIZATION
Of the modes of persuasion some are technical, others non-technical. By the latter I mean such things as are not supplied by the speaker but are there at the outset -- witnesses, evidence given under torture, written contracts, and so on.
Aristotle, _Rhetoric_, Book I, 1355, 36-38. __________________________________________________________________________