Monday, 19 May 2008


Unless policymakers understand the disruptive real effects of overly expansionary monetary policy, the energy and food crisis may worsen beyond manageable limits and put at risk millions of more lives.

Addressing inflationary expectations is not costless.

World energy and food markets can be stabilized, but only when the Fed and BOE renounces interest rates control and reins in monetary and credit expansion to a stable range.

This is exactly what Paul Volcker did successfully during his tenure as Fed chairman.

Economists and the US Congress must convince the Fed and the BOE to concentrate on managing liquidity, which is under its total control, and give up managing the entire economy, which is not under its control.

After seven years of inflationary monetary policy, there is now more pressing need than ever for stabilization policies to address inflation and energy and food crises.

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