By the late eighties, New Zealand had experienced nearly 20 years during which consumer price inflation had been above 10 per cent almost without a break. Interest rates after adjustment for tax and inflation were often strongly negative, and there was as a consequence a strong incentive to invest in real estate and shares, using as much borrowed money as could be obtained.
We can only control that rate. Long-term interest rates are determined largely by global financial markets. If the Fed decides to buy US Treasury bonds worth USD 1 trillion a year, then that affects interest rates worldwide. SPIEGEL: The Fed has now announced to reduce the purchases of government bonds. What does that mean for the Euro area and the Euro?