How to stop the Great Crash of '08 - Asia Times Online(How Does Money Lending Interest Work)
The dollar collapse and oil price spike of today mimics the dollar’s fall and the oil price surge at the end of the feckless administration of Jimmy Carter, and stopped when the Fed tightened monetary policy between 1979 and 1982. Recently, though, the correlation of daily returns to oil and the trade-weighted dollar index has reached a new low, that is the oil price is more likely than ever to rise on days that the dollar index falls. But a shift from consumption to savings will increase the supply of long-term capital, bringing down the cost of equity to firms and long-term interest rates, including mortgage rates. If eliminating capital gains tax seems too much like a giveaway to the rich, at least index capital gains for inflation. With inflation running at 3-4% today rather than at 12% in the aftermath of the Carter administration, an increase in the central bank’s short-term rate, say, to 4%, probably would have a big impact on the dollar exchange rate as well as commodity prices. Learn more
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