----- Original Message ----- From: Doug Henwood <dhenwood at panix.com> To: <lbo-talk at lists.panix.com> Sent: Wednesday, June 12, 2002 5:48 PM Subject: Re: Shekel Rate, Interest Rate, Stagflation and 'Good' Inflation
> pms wrote:
>
> >When the market raises interest rates sharply don't central bankers raise
> >the shorter interest rates just to keep up appearances? Then feed a
bunch
> >of catch phrases to the press to explain what's going on to us Rubes?
>
> Soemtimes it's hard to say who's leading, the market or the central
> bank. But if bond rates rise sharply, any central banker is likely to
> conclude that inflation fears are rising, and they raise rates
> accordingly. It's not to keep up appearances - it's what their
> function in life is.
>
> Doug
>
But if the inflation is caused by imports bought with a devalued dollar and
sharp rises in things like steel, caused by protectionist trade policies,
and not the inflation of a hot economy, wouldn't raising interest rates just
kill growth without doing the job on the inflationary trend? Until the
economy is brought to a standstill anyhow.