[Marxism] Interest rate debate

Marvin Gandall marvgandall at rogers.com
Thu Mar 25 08:57:11 MST 2004

Gerald Baker in today’s Financial Times describes the renewed debate within
financial circles about whether it is time to tighten US monetary policy,
and weighs in against “sado-monetarism”.

Baker says “a deviancy popular among certain central bankers and
commentators in the 1980s, is out of the closet and back in respectable
living rooms.”

Advocates of a rate hike, most notably the Economist and Wall Street analyst
Stephen Roach, think the threat of deflation has passed, but worry that the
excessive liquidity pumped into the US economy since the 2000-01 recession
is creating another bubble and the potential for a global financial crisis.
The accompanying Economist article notes that with growth at 4%, the Federal
Reserve now has room to constrict demand, arguing for the use of GDP rather
than inflation to gauge monetary policy.

Baker reflects the Fed position when he cites continuing excess capacity,
widespread unemployment, and a falling core rate of inflation as evidence
“the keening for a tightening of monetary policy now is misplaced”, and
would tip the US economy back into recession - or worse.

Articles available on www.supportingfacts.com

Sorry for any cross posting.

More information about the Marxism mailing list