A great puzzle in today’s world economy is the continued low level of long-term real interest rates in the United States. Conventional macroeconomists like me look at America’s current-account deficit, now running at 7% of GDP, and know that such vast deficits are inevitably followed by large currency depreciations. So we expect a substantial depreciation premium on US interest rates.
A great puzzle in today’s world economy is the continued low level of long-term real interest rates in the United States. Conventional macroeconomists like me look at America’s current-account deficit, now running at 7% of GDP, and know that such vast deficits are inevitably followed by large currency depreciations. So we expect a substantial depreciation premium on US interest rates.