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Is The Greek Economy Better Than The Us Economy?
What analysts explain is the Keynesian economic model of avoiding financial crisis by Quantitative Easing. If a central bank prints money and buys up government bonds, then the interest rate on government bonds is lowered. This would affect the yield of all other bonds that use government bonds as references, resulting in cheaper mortgages and borrowing costs for individuals and businesses, who can save up money from here, to achieve higher consume with it. Since 2008 the Federal Reserve have already printed money in excess twice, in order to have interest rates go lower, and the practical effect in both cases has been the opposite – the interest rates have gone higher. Also, the Federal Reserve have stopped printing money on three occasions, since 2008. All the three cases have resulted in interest rates going down significantly. Now they have decided to resume printing. Only the Keynesian model has ceased functioning. The effect on the U.S. and Europe of this gap between theory and practice will probably be hyperinflation. The case of Greece has deepened the problem of government bonds. When a government receives a loan from a bank or a bond investor, this transaction is a mutual agreement. The lender whose partners cannot pay for a loan any more, lose their money. When governments take up such loans, states are implied. Such entities are long lived, so in theory the debt can be paid for, sooner or later. European creditors have rushed to lend to Greece, and their money was badly managed. But the case of Greece has revealed a problem: the citizens of a country may refuse to identify themselves with the government that has created a debt to burden several generations. Capitalism should refer to states as well as to individuals and companies. It seems to elude Greece in debt, a member of the newly formed European Union. Its main creditors are different European economic entities. Political interests and economic laws clash. While the economic laws under which the debts were contracted stay the same, politicians try to avoid the default of Greece. The collapse of paper money will force the European Union towards political pragmatism and the American economy towards solutions more efficient than that of government bonds; otherwise the situation of Greece will repeat itself elsewhere. But till then, private investors seeking a smoother way out where paper money is not involved had better watch out for more gold news. Article Directory: http://www.articledashboard.com By reading the best gold news you will be able to make the right choices regarding your investment. |
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