This editorial from Reuters says that central banks should raise rates, even though unemployment is really high in the US and many other countries.The reserve army of labor must be maintained!
February 7, 2011 / New York TIMES / Reuters Breakingviews Time to Tighten Loose Money By IAN CAMPBELL and LISA LEE The stagflationists are losing the argument. The world is inflating and that’s a worry. But inflation is coming from growth that seems increasingly strong and from money that’s looking far too loose for a reviving world. The risk is that oil and other commodities will soar much higher now, as they did in 2008, only this time the spike may not recede quickly. The chairman of the Federal Reserve, Ben Bernanke, cannot be held responsible for social unrest in developing countries. But there’s a link between ultra-loose money and global asset prices. The Fed has successfully pursued an ultra-loose monetary policy to help avert a second depression. But the $600 billion printing looks like a precautionary overdose whose inflationary influence is widespread. Oil at close to $100 a barrel is injecting inflation into the world economy. Political unrest is a secondary factor. Food and other commodity prices — less sensitive to Middle East unrest — are also surging. Global price increases are now a big risk. The cause? Most Western economies are out of their hole and joining in emerging economies’ growth fest. January’s report from the Institute for Supply Management on the huge services sector of the United States economy showed the strongest figure in six years. There are problems here for both developed and developing economies. As Charles Bean, deputy governor of the Bank of England, said last week, if external inflation is very strong, then the central bank will have little choice but to clamp down harder on domestic sources of inflation, even in a still weakly recovering [???] economy like Britain. The president of the European Central Bank, Jean-Claude Trichet, talked down expectations of a rate increase, suggesting that energy-driven inflation would be transitory. If the world is indeed gathering steam, he may be wrong. Australia’s central bank has just raised its growth forecast for the coming years. Rates are rising around the globe. China, India and Brazil have tightened. So, too, has Indonesia. The West will have to follow. For inflated asset markets there will be risks. But the shift from ultra-loose to tighter monetary policy is going to have to happen soon. -- Jim Devine / "Living a life of quiet desperation -- but always with style!" _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
