Why The United States, Europe, and Japan are heading toward deflation, a classic prolonger of crises. further?

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If I were a governor of central bank in any of them, I would have "INCREASED" the interest rate rather than putting it down to the zero rate...! :(

We'd rather better "restrict" money supply to increase the value of currency and increase the interest rate to encourage the trade of national debts! The investment rate won't increase due to the liquidity trap anyway so that we'd rather better decrease the excess supply (of capital), i.e. cutting down the unnecessary supply in a Short run. In the middle run, as savers gain the interest rate, unnecessary enterprises will be closed down, some productive enterprises will put a prise rise so that labourers (mainly unions) will also start bargaining for their wage, etc in the middle run.

Speaking of national debts, we'd rather better increase the interest rate in order to stimulate the demand for buying debts as a traded equity. As the interest rate starts going up it means the price inflation of these bonds. As the inflation of commodity, i.e. national debts, people start buying them and trade each other. As the exuberance to buy a national debt is encouraged, the public fonding is coming into the gov't budget i.e. the Golden Role occurs.

Are the bunch of buggers working in these central banks and major financial institutions real elites? I often think I'm much superior to them? Ain't I insane to say that?? Oh, God...



>will be the biggest challenge to democracy since the Second World War.

As I said in my blog, according to Kondratieff, we are now in the "Winter" which will cause the huge mass destruction as same as WW2 and Spain-America War. Until reducing the excess supply of capital and discovery of a new techology and/or a new natural resource take place, the winter won't end.

>I really do not think governments will be able to take the people with them when it comes to reducing our respective deficits unless the private market fills the gap.

I always claim people that the IS-LM model fails! It is useful to demonstrate a plausible explanation to indicate how the monetary and fiscal policy work. However, this model isn't proven by any statistic analysis. As Prof. Paul Krungman said many economists say lie. The IS-LM model always encounters the simultaneous problem (impossible to predict the change by using explanatory variables because these explanatory variables are also influenced by the dependent variable) and depends on the "sensitivity" of variables e.g. interest rate, tax, etc. As a matter of fact, I should be called a radical government sceptic. Although I admire the analyses introduced by J.M. Keynes, the possitive planning always suffering from "sensitivity dependency", "effect lagging", "violation of equity", etc.