Low inflation might sound like good news, but today, it is also a sign of an economy that is not right, just like a car not firing all its cylinders. Persistent low inflation can lead to deflation like in Japan. It is intriguing economics. Low inflation is not right yet high inflation is not either; quite a daunting task to manage for economists; akin to being a good kid is not given a shoulder pat whilst being a bad kid would also get the stick. So what is the real threat? Being accomodative via QEs long term purchases of Treasury bills, its debts keep mounting to the tune of USD4.1 trillion and this needs unwinding down sooner or later. While playing a hide & seek game through roll overs upon maturity, how then can the Fed sustain on this where it has to pay roll over interest. It is a balancing game that many do not know nor cherish. At worst, USs position affects every walks of life in this planet. So dont think you are insulated just becoz we are in Malaysia; in the far away East
Posted on: Fri, 11 Apr 2014 16:45:02 +0000
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