In its 2013 long-term budget projections, CBO forecasted that the long-run average annual interest rate would be 3 percent. This year’s forecast has lowered that projection to 2.5 percent. This new projection is not only lower than previous forecasts but also lower than the average range of 3.1 over the period of 1990 to 2007. Thankfully, CBO goes through the different factors that influenced their lower projected interest rates. And these factors are interesting in their own right.
NYT Says 12.4 Percent Growth in China Is "Sputtering" by Dean Baker
"Some economists inside and outside the government say China has a choice: slow down lending and accept steady declines in economic growth each year, or continue heavy lending and risk a sharp drop in economic growth someday when the financial system begins to teeter. But nobody knows when that might happen."
If that sounds very scary then it's worth reading through to the last paragraph:
"Retail sales are growing strongly, up 12.4 percent in June from a year earlier, according to the government figures released Wednesday, nearly matching a pace of 12.5 percent in May."
As the article explains, real wages for factory workers are rising at more than an 8.0 percent annual rate. If that pace of real wage growth continues, the country should not have to worry about a lack of demand in the years ahead.It's always everywhere a dilemma. The possibility of other solutions is foreclosed.
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