Quote:
Originally posted by Captain
I am not an economist, but isn't the Federal Reserve's policy to let interest rates float up when the economy is good and to bring them down when the economy requires stimulus?
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The Feds do not control long term interest rates. The long term interest rates reflect the markets confidence in the government to have fiscal discipline. After the 93 deficit act i believe that the long term interest rates spiked showing that the markets had no confidence in the Dems. Once the Repubs took congress, long term interest rates came down showing the markets had decided that the adults were in charge.
When the Dems were in control of congress the talk was about reducing the deficit in half in the next eight years. When the Repubs took over there was no question that the budget was going to be balanced. It was just a question of how long Clinton could prolong the deficits by fighting the Republican discipline.
The government was shut down because Clinton thought that the deficit was being reduced too much.
