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As the interest rates go up again, and liquidity tightens again, the financial industry is going to run out of the underlying resource that sustained it - easy and plentiful access to money. As that constraint imposes its implacable discipline, and the financial industry finds out that it no longer has anything to offer to its clients (trading stuff, or trading imaginary products remotely backed by stuff, will no longer be so much more profitable than making stuff), it is going to shrink and withdraw.

How important in all this are the Japanese yen's consistently low interest rate and its role in so-called carry trades?

Truth unfolds in time through a communal process.

by marco on Mon Jun 25th, 2007 at 02:49:28 AM EST
It's a very important source of the "naturally low interest rates" that have propelled the financial services industry over recent years...
by Metatone (metatone [a|t] gmail (dot) com) on Mon Jun 25th, 2007 at 03:57:15 PM EST
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