A punch bowl made in China – LA Times Editorial

From the Los Angeles Times (free registration required):

A FORMER FEDERAL RESERVE CHAIRMAN once famously said it was the central bank’s job to “take away the punch bowl when the party is warming up.” That’s precisely what Alan Greenspan and his colleagues at the Fed have been doing for more than a year now, as they have gone about methodically raising the overnight federal funds rate from 1% to 3.5% ” with Tuesday’s quarter-point move marking the 10th increase since June 2004.

But these moves haven’t been putting that much of a damper on the party. Long-term interest rates have not risen in tandem with short-term rates; oddly enough, long-term rates are lower than they were before June 2004. The convergence of short-term and long-term rates usually signals a recession (when there is little demand for investment capital driving up long-term rates), but in this case there is a different explanation for the Fed’s failure to nudge long-term rates higher. Quite simply, China is supplying a punch bowl to keep the party going.

CDT EBOOKS

Subscribe to CDT

SUPPORT CDT

Browsers Unbounded by Lantern

Now, you can combat internet censorship in a new way: by toggling the switch below while browsing China Digital Times, you can provide a secure "bridge" for people who want to freely access information. This open-source project is powered by Lantern, know more about this project.

Google Ads 1

Giving Assistant

Google Ads 2

Anti-censorship Tools

Life Without Walls

Click on the image to download Firefly for circumvention

Open popup
X

Welcome back!

CDT is a non-profit media site, and we need your support. Your contribution will help us provide more translations, breaking news, and other content you love.