Policies apart: how the central banks differ on prices

(Source: 4/7/2010 Financial Time print edition)

[My Thoughts: Keynesian economists believe a priori that capitalism is inherently unstable; therefore, government intervention is absolutely necessary to smooth out the drop in consumption during recessions. They never consider seriously enough that recessions are in fact a result of prior government policies, which in our modern times it emanates from Central Bank controlling the price of money (i.e. the interest rate). Maintaining low interest rates necessarily requires printing money. The excess money floods the economy, which pushes up prices. Slowing down the prining of money or removing it completely from the economy (which in economic speak means tightening monetary policy) eventually leads to a bust. No one, except the "Austrian" economists adhere to this philosophy. I do. This philosophical framework is what allowed me to forsee the previous financial crisis; it is reason that i can confidently determine another crash, in much greater intensity, is on the way. The following missive from the Financial Times gives evidence that the policy of excessive money printing is slowly coming to an end. This is inconsequential because an economic bust will inevitably occur once money printing slow.]

China

The People’s Bank of China is playing a waiting game but with the benchmark one-year deposit rate currently below inflation, a rate rise is likely in the next few months

US

The Federal Reserve said in March rates would remain at ‘exceptionally low’ levels for an ‘extended period’. Market expectations are for rates to stay on hold for six months or more

Eurozone

The European Central Bank sees growth and inflation remaining moderate, which means markets are not pencilling in a rise in the main policy rate until next year

Brazil

The central bank has kept its target overnight rate at 8.75 per cent since July but sent a strong signal last month of an imminent rise. Economists expect the rate to hit 11.25 per cent by 2011

India

The Reserve Bank of India raised interest rates in March for the first time in almost two years in what is expected to be a long tightening cycle as it tries to cool rising prices

Japan

Despite cutting rates to 0.1 per cent, Japan is still mired in deflation, putting pressure on its central bank. Markets judge that rates will remain close to zero for at least a year

UK

The Bank of England voted unanimously in March to hold rates at 0.5 per cent and halt monetary easing, but noted that a close eye needed to be kept on the public’s inflation expectations

Argentina

The central bank is likely to keep monetary policy loose for some time despite the latest official data putting monthly inflation at a nearly four-year high of 1.2 per cent in February