The first headline I saw this morning on www.prudentbear.com (that is the site from where I begin my morning explorations) was a link to Raghuram Rajan’s speech at Brookings on Thursday. I did not proceed further. I opened the link. Read the speech and I found it explosive.
I will be very interested to know how the US handles his visa after he hangs up his boots in RBI 🙂
As I was reading, I annotated his speech with my comments and highlights. A thought struck me to convert it into a proper Op.-Ed. with his remarks followed by my comments. MINT was only too happy to oblige.
Looks like the machinery of the West swung into action, closing ranks:
(1) FT correctly called it an explosive speech. Interesting that FT reports that Bernanke said that he would take Raghuram to task for his remarks! I think he must have meant that literally and otherwise. Raghu has torn into QE and mocked the Fed’s defence of QE.
(2) Reuters reported that there was a cool reception to his speech. Chicago Federal Reserve Chairman is reported to have said that low inflation was a problem globally. Is it? He does not seem to be aware of this short paper by two economists at the FRB Minneapolis, published in January 2004. Except in the Great Depression of 1929-32, there has been no link between deflation and depression. So, why bother about deflation so much as to build up enormous costs, distortions and dislocations locally and globally?