Interest Rates

2nd November, 2009

Very interesting analysis of the medium term outlook for interest rates in the FT today. One of their columnists argues for short term increases in interest rates. He points to the risk of a bond market bubble developing. This is the kind of asset pricing bubble which we have sworn we will avoid at all costs. Nouriel Roubini, on the same page, (the famous Dr Doom) argues that such a bubble has already developed in risky assets like equities, oil, energy and commodity prices.




What does all that mean for Ireland?


It means at a time when tax rates are going up and nominal income is coming down, it is likely that interest rates will be going back up. The perfect squeeze.


This is why it is so important that radical measures be taken to improve domestic competitiveness. Not to help so called faceless multinationals. But to help all of us allow our money to buy more. Falling prices are the only thing that will avoid falling wages causing our country getting into even more trouble.