Friday, December 12, 2008

A Rebuttal to a Vicious Call

Here is an excerpt from the current print edition of The Economist to expose the ongoing twisted propaganda on our monetary stance by some spoiled brats:

"In setting its interest rates, the Federal Reserve worries about growth and inflation. It does not concern itself unduly with the dollar. Policymakers in emerging economies, by contrast, cannot afford that luxury. In countries prone to high inflation, a stable exchange rate helps to anchor prices. Such economies have also usually borrowed in dollars or euros, because their creditors insist on being repaid in hard currency. A precipitous fall in the currency can make these debts insupportable.

For these reasons, emerging economies must often raise interest rates in the teeth of a slowdown in an effort to defend their currencies. This “procyclical” monetary policy damages the economy, inflicting losses on banks and their clients. But it may be the lesser of two evils. Rich countries can afford to treat their currencies with benign neglect. Emerging economies cannot".

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