So the gentle wings of the hummingbird move great
storms in distant oceans; everything is interconnected. This is the
basis for a lot of current social anxiety in the United States as we
debate the responsibilities we citizens have to one another.
So the reaction of the Indian economist and Reserve Bank Governor Raghuram Rajan to the Fed "tapering" is important to all of us. Mr. Rajan, speaking for the developing world, is alarmed at the economic policy of the Fed which amounts to tightening and decreasing the capital available to all the world. Initially, in response to the American domestic trouble, the Feds made more money available but kept rates low. As returns in the U.S. were suppressed, that newly available money migrated to developing countries where it earned more. Those economies expanded. Now the Fed plans to retrace its actions. Money will be less available and U.S. interest rates will rise. A decrease in the money supply will result in an emigration of money back to the U.S. with significant consequences to developing nations. Mr. Rajan expects some real trouble and significant risk of decline in the emerging economies as less money is available.
In our effort to right our economic ship we may swamp the developing nations. So, what is our responsibility? Our economic policy might cause considerable damage to the fragile economies of developing nations with significant impact on their poorer people.
What should Obama do?
So the reaction of the Indian economist and Reserve Bank Governor Raghuram Rajan to the Fed "tapering" is important to all of us. Mr. Rajan, speaking for the developing world, is alarmed at the economic policy of the Fed which amounts to tightening and decreasing the capital available to all the world. Initially, in response to the American domestic trouble, the Feds made more money available but kept rates low. As returns in the U.S. were suppressed, that newly available money migrated to developing countries where it earned more. Those economies expanded. Now the Fed plans to retrace its actions. Money will be less available and U.S. interest rates will rise. A decrease in the money supply will result in an emigration of money back to the U.S. with significant consequences to developing nations. Mr. Rajan expects some real trouble and significant risk of decline in the emerging economies as less money is available.
In our effort to right our economic ship we may swamp the developing nations. So, what is our responsibility? Our economic policy might cause considerable damage to the fragile economies of developing nations with significant impact on their poorer people.
What should Obama do?
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