The world’s central banks are (mostly) raising interest rates to fight off inflation. That’s a good thing, as inflation erodes living standards across the board.
Or so most people think. The United Nations says rising rates are a threat to global stability and will devastate developing economies. As such, it’s calling on central banks to stop raising rates:
In its annual report on the global economic outlook, the United Nations Conference on Trade and Development said the Fed risks causing significant harm to developing countries if it persists with rapid rate rises. The agency estimated that a percentage point rise in the Fed’s key interest rate lowers economic output in other rich countries by 0.5%, and economic output in poor countries by 0.8% over the subsequent three years.
UNCTAD estimated that the Fed’s rate increases so far this year would reduce poor countries’ economic output by $360 billion over three years, and further policy tightening would do additional harm.
Okay…then how is inflation supposed to be tamed? This being the U.N., through a series of government interventions that will make matters even worse:
UNCTAD said rather than increase rates, which will do little to ease shortages of energy and food, policy makers should focus on measures that target price spikes directly, including price caps funded by one-off taxes on the unusually large profits being made by many energy companies.
There’s no better way to ensure more inflation – plus shortages! – than meddling with price mechanisms and taxing producers.
A quick refresher about inflation from the Hoover Institution’s David Henderson:
“Inflation is always and everywhere a monetary phenomenon.” Monetary economist Milton Friedman made this line famous after stating it in a talk he gave in India in 1963. In a trivial sense, of course, the statement is true. Inflation, by definition, means that money loses its purchasing power and, therefore, is a monetary phenomenon. But Friedman meant much more. After having defined inflation, in that same talk, as a “steady and sustained rise in prices,” Friedman argued that one could not find inflation anywhere in the world that was not caused by a prior increase in the supply of money or in the growth rate of the supply of money. His statement was an empirical one, not a logically necessary one, and most professional economists, still in the thrall of John Maynard Keynes, did not agree with Friedman. But within a decade, the evidence from the United States and other countries had convinced most economists that Friedman was right.
The U.N.’s economists seem either to have forgotten this lesson or chosen to ignore it…just as central bankers should ignore the U.N.’s economic nostrums.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.
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UN been wrong since 1945
We need to get out of the dam UN, owned & operated by the evil empires, but hosted and mainly funded by the good ol USA. But…10%….
Am I correct in assuming that the island nation of Tonga has a UN vote equal to that of Russia? [Expletive deleted] Still, the UN may not be universally responsible. Consider Klaus Schwab and his new League of Global Resetters lurking behind the curtain. And let’s not forget good ol’ Tricky Dickie who abandoned the GOLD Standard in favor of infinitely reduplicating paper psychoses disguised as currency.
The UN has adopted Modern Monetary Policy, whereby debt and deficits don’t matter, so printing an endless supply of money to spend on whatever your heart desires is perfectly acceptable and has no downsides. So what’s their concern? Just give printing presses to the poor nations and all will be well again! Problem solved!