I must say, I never expected to see the day where I would be talking about anything other than reducing the debt, I’m running into the tyranny of zero, which is where you can’t reduce (the debt) any more
But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
There’s an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology.
Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices.
If we were to do that we would increase the supply of skilled workers that our schools have been unable to create and as a consequence of that we would lower the average wage of skills and reduce the degree of income inequality in this country.
Developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset.
