The coordinated rate cut was the right thing to do. But I don’t expect much from it — because the relationship between Fed funds rates and the rates most businesses actually pay is very weak right now, thanks to the messed-up state of the financial system.
A quick illustration: in early July 2007, before the crisis, the target Fed funds rate was 5.25% and the rate on 30-day A2/P2 commercial paper — that is, CP issued by less-than-sterling borrowers — was 5.4%. On Monday of this week, the target Fed funds rate was 2%, down 325 basis points from pre-crisis levels, but the CP rate was 5.61% — up from pre-crisis levels.
So will this latest rate cut make any difference to borrowers? Maybe — but only to a few of them. We’re way past the point at which conventional monetary policy has much traction.
Let’s make climate a culture war!
If the politics of climate change end up polarised, is that so bad? No – it’s disastrous. Or so I’ve long thought. Look at the US – where climate is even more polarised than abortion. Result: decades of flip flopping. Ambition under Clinton; reversal...
