And floating and fixed exchange rate regimes coexist uneasily, because volatility tends to affect the floating currencies (often the euro, and recently the Latin American currencies).

Thus, the exchange rate regime in Latin America today is one of actively managed floating.

But the continuing success of the floating exchange rate system does not imply a smooth ride in 2011.

Managing a floating rate has also allowed Latin American countries to accumulate a significant level of international reserves.

Nearly all mortgages have floating rates that vary with the five year loan rate set by the People s Bank.

But what most characterizes Latin America s experience is that, despite publicly preaching the virtues of a floating rate, the authorities actively intervene in currency markets, this time in different and creative ways. Thus, the exchange rate regime in Latin America today is one of actively managed floating.

First, China needs capital controls to retain monetary policy independence until it is ready to adopt a floating exchange rate regime.

Coming from different experiences, most countries converged on the adoption of a floating exchange rate, many in the context of inflation targeting.

The floating exchange rate system works surprisingly well, but currency volatility and unpredictability look likely to remain an enduring constant in 2011 and beyond.

After all, if a country s debt GDP ratio is to decline without austerity, the interest rate that it pays on its debt must be lower than its GDP growth rate.

Floating point exception

Interest rate spreads on Italian sovereign debt have widened, but not sharply.

The average high debt episodes since 1800 last 23 years and are associated with a growth rate more than one percentage point below the rate typical for periods of lower debt levels.

Greece is caught in a classic debt trap, as the interest rate on its public debt has soared beyond its growth rate by a considerable margin Spain is teetering on the brink.

This time, the unemployment rate and household and government debt are much higher.

BEIJING On October 26, the renminbi s spot exchange rate against the US dollar reached the upper limit of its floating range for the second consecutive trading day.

A direct effect of the higher interest rate would be to increase the budget deficit and the rate of growth of government debt.

Me was a floating head.

Floating market, Colombo, Sri Lanka.

By the lone stars floating ,

Farmers and wholesalers gather in several floating markets in a region that resembles the floating market of Thailand.

In Europe, the market for Greek debt has frozen, and interest rate spreads between Irish and German euro denominated debt recently reached alarming levels.

Deflation increases the real (inflation adjusted) debt burden, as well as the real interest rate.

Indeed, a third lesson is that neither hard pegs nor unfettered floating facilitate the preservation of a competitive real exchange rate, which is crucial to promoting and sustaining economic development.

The effect of quantitative easing on exchange rates between the dollar and the floating rate currencies is a predictable result of the Fed s plan to increase the supply of dollars.

With floating exchange rates, it is not.

Turned to dust , floating in the air ,

Turned to dust , floating in the air ,

But such a strategy can work only in countries where the duration of the government s debt is long and the interest rate on that debt is fixed.

Higher inflation would cause the interest rate on new debt to rise in a way that prevents the erosion of the real value of the total debt.

But what most characterizes Latin America s experience is that, despite publicly preaching the virtues of a floating rate, the authorities actively intervene in currency markets, this time in different and creative ways.

So that they will become floating dust particles .

So that they will become floating dust particles .

Even an economy with an overall budget deficit will have a declining government debt GDP ratio if the growth rate of its nominal GDP exceeds that of its debt.

Another major risk of interest rate liberalization in China stems from rising public debt, particularly local government debt, which has grown significantly in the wake of the global financial crisis.

A simple structure would be to make all debt payable over 40 years, carrying an interest rate of 2 .

They got little babies in there, floating in there.

Sami's lifeless body was floating in the swimming pool.

But flexibility is not a synonym for pure floating.

A common application is removing oil floating on water.

Since China s current benchmark interest rate is higher than the comparable rate in the United States, individuals and institutions have an incentive to keep renminbi as assets and dollars as debt.

And, because people trade bonds for commodities, cash, and stocks, the prices of government debt are the rate of inflation, the nominal interest rate, and the level of the stock market.

Countries that borrow 3 and grow at a rate of 4 will converge towards a debt GDP ratio of 75 .

Shamsheer writes in Somewhereinblog about the floating markets he visited

That is because an increase in the inflation rate causes interest rates on new debt to rise by an equal amount.