Comments on: June & July Debtwatch PDFs posted http://www.debtdeflation.com/blogs/2007/07/04/june-july-debtwatch-pdfs-posted/ Analysing the Global Debt Bubble Tue, 06 Jan 2009 08:42:27 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Miner http://www.debtdeflation.com/blogs/2007/07/04/june-july-debtwatch-pdfs-posted/comment-page-1/#comment-205 Miner Wed, 01 Aug 2007 22:25:46 +0000 http://www.debtdeflation.com/blogs/?p=29#comment-205 Steve, What would be the impact of a floating interest rate (similar concept to the floating of the dollar) on the debt market? At present the official cash rate forms the fixed basis for interest rates, which means that the reaction of the price of credit, compared to the demands for credit, is not particularly linked (from a timing or use perspective). I think one of the problems we are experiencing with debt is that there is not a clear price signal for debt. The main aim of the official interest rate is to be the mechanism for controlling consumer price inflation at between 2 & 3%pa and in doing so fulfil the stated aims fo the RBA. The problem, I think, then becomes that the rate is also used to price debt, which is used to purchase a wide range of items which may or may not be used in the calculation of the CPI. A floating interest rate would allow debt to be priced on the demand for it, not CPI, which is impacted by a whole range of other factors (such as lower prices due to changing suppliers of consumer goods, such as China, improved productivity). Another possible solution might be to include all items that debt is used for in the calculation of inflation. Steve,

What would be the impact of a floating interest rate (similar concept to the floating of the dollar) on the debt market?

At present the official cash rate forms the fixed basis for interest rates, which means that the reaction of the price of credit, compared to the demands for credit, is not particularly linked (from a timing or use perspective).

I think one of the problems we are experiencing with debt is that there is not a clear price signal for debt. The main aim of the official interest rate is to be the mechanism for controlling consumer price inflation at between 2 & 3%pa and in doing so fulfil the stated aims fo the RBA. The problem, I think, then becomes that the rate is also used to price debt, which is used to purchase a wide range of items which may or may not be used in the calculation of the CPI.

A floating interest rate would allow debt to be priced on the demand for it, not CPI, which is impacted by a whole range of other factors (such as lower prices due to changing suppliers of consumer goods, such as China, improved productivity).

Another possible solution might be to include all items that debt is used for in the calculation of inflation.

]]> By: Dave http://www.debtdeflation.com/blogs/2007/07/04/june-july-debtwatch-pdfs-posted/comment-page-1/#comment-200 Dave Mon, 30 Jul 2007 11:29:41 +0000 http://www.debtdeflation.com/blogs/?p=29#comment-200 Looks like the excitement in housing 'affordability' from the labor party and the current debt market issues overseas might have sidetracked Steve! I look forward to the next post! It's all very interesting. To all that are interested - I've started my own economics blog - I don't have a PHD - but interested nonetheless. The first 3 entries are on the housing bubble / debt issues but I want to branch out into other areas in the future. http://dave-davesramblings.blogspot.com/ Looks like the excitement in housing ‘affordability’ from the labor party and the current debt market issues overseas might have sidetracked Steve! I look forward to the next post! It’s all very interesting.

To all that are interested - I’ve started my own economics blog - I don’t have a PHD - but interested nonetheless. The first 3 entries are on the housing bubble / debt issues but I want to branch out into other areas in the future.

http://dave-davesramblings.blogspot.com/

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