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Flames in 07 · 12-08-2008, 07:20 PM

So for the economists in the crowd:

http://ca.news.finance.yahoo.com/s/0...-economic.html

where it says this:

Former IMF chief economist Kenneth Rogoff wrote recently that a two-year run of moderate inflation in the six-per-cent annual range - three times the Bank of Canada's sacrosanct target - might be good for the world because it would allow the mountains of debt that has piled up over the last decade or so to be paid off in debased currency.

Grauman said central bankers - especially those that have exhausted monetary policy because they have chopped their rates effectively to zero - can try and reduce longer-term interest rates and ignite inflation by printing money to buy up government bonds.

There is a risk that once the genie is out of the bottle, inflation will get out of control.

My questions are:

First of all, what is 'debased currency'?

Second of all, how does reducing long term interest rates increase inflation. Aren't they opposite things? ie wouldn't interest rates and inflation hold hands together?

12-08-2008, 07:20 PM	#737
Flames in 07 #1 Goaltender Join Date: Aug 2006 Exp:	So for the economists in the crowd: http://ca.news.finance.yahoo.com/s/0...-economic.html where it says this: Former IMF chief economist Kenneth Rogoff wrote recently that a two-year run of moderate inflation in the six-per-cent annual range - three times the Bank of Canada's sacrosanct target - might be good for the world because it would allow the mountains of debt that has piled up over the last decade or so to be paid off in debased currency. Grauman said central bankers - especially those that have exhausted monetary policy because they have chopped their rates effectively to zero - can try and reduce longer-term interest rates and ignite inflation by printing money to buy up government bonds. There is a risk that once the genie is out of the bottle, inflation will get out of control. My questions are: First of all, what is 'debased currency'? Second of all, how does reducing long term interest rates increase inflation. Aren't they opposite things? ie wouldn't interest rates and inflation hold hands together?