Friday, February 01, 2008
The same voices that supported tough macroeconomic policies to deal with the excesses of spending and borrowing in east Asia, Russia and Latin America are today pushing for a significant relaxation in the US to deal with the so-called subprime crisis. Interest rates should be slashed quickly and $150bn put into taxpayers’ pockets by April at the latest, they say. The Fed cut by another half-point on Wednesday.
A side question not in the FT: does this actually put US interest rates below US inflation and is this therefore the equivalent to a Mediaeval monarch debasing his currency?
The FT concludes that The USA should follow its own rules (where have we heard that idea before?) :
The US should face its need for adjustment with courage and reason, not fear. It should stop behaving as the whiner of first resort, ready to waste all its dry powder on a short-sighted attempt to prevent a 2008 recession. Many poorer countries with weaker markets and institutions have survived and benefited from an adjustment that involves a year of negative growth. Faster bank recapitalisation, fiscal investment stimulus and international co-ordination should be first on the policy agenda.
Does that also apply to us in this sceptered Isle? If so what should we be doing different?
As for the double standards - its obvious why - its politics. The politicians want results now, the economists they pay for give them something which may create temporary relief.