Whether or not one agrees with the contents of the piece written by Harding and Wilson in FT, one has to agree with their title, ‘Two against the world’. That is accurate.
The advantage of giving up the Fed’s flexibility is that, if markets know short-term interest rates will not go up for two years, that will bring down longer-term interest rates as well, making it cheaper to borrow and giving the economy a boost.
Why, yes, of course! That is what has been happening all these years with low interest rates. You cut interest rates, corporations and businesses make productive investments, they make profits, they generate employment and tax revenues for the government and governments then expand their safety net for the old, the infirm and the poor and there is utopia ever after.
For a more accurate flavour of the consequences of the ‘Two vs. the world’, check out Gilian Tett’s piece titled, ‘The Swiss enter Alice in Wonderland territory’. What Switzerland is going through foreshadows what is to come for the rest of the world.
The first step on the long road to redemption is to accept that there is no easy way out for years of debt accumulation. Funny how critics and defenders of the current system are birds of the same flock in the larger scheme of things.