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6 | FORBES ASIA NOVEMBER 2016
FORBES ASIASIDELINES
EDITOR-IN-CHIEF
Steve ForbesE
ven in democracies, what is
probably the most crucial act
of economic policymaking
today—the imposition of superlow
to negative interest rates by central
banks—is hardly raised in political
debate. Donald Trump did so against
Federal Reserve chief Janet Yellen
in his drive-by fashion, but the long
bout of “quantitative easing” by U.S.
monetary authorities is too arcane for stump speeches.
New British Prime Minister Theresa May was the rare exception in early
October when she challenged such practice by the Bank of England as an af-
front to savers, who are denied much of a return on any but the most specula-
tive financial instruments, and a gift to the wealthy, who are prone to own assets
that are bid up in a loose-money environment. Collateral harm is being done to
the likes of insurers and pension funds.
Perhaps PM May had special dispensation to challenge the policy because
of the pounding (sorry!) the British currency has sufered since the Brexit vote
last spring. She can importune for higher rates without much fear that foreign-
exchange appreciation (normally associated with monetary tightening) would
cause distress now. By contrast, the prospect of further gains in the U.S. dollar,
and the efect they could have on American export sectors, is one of the few re-
maining checks on the Yellen Fed’s inclination to nudge up yields in December.
A similar dynamic plays out in other industrialized nations. Japan has prob-
ably the most extreme situation, with the yen showing stubborn strength (it
is considered a safe haven in periods of global volatility despite the country’s
own economic doldrums) even as its central bank attempts ever more desper-
ate variations of monetary stimulus. Each time the yen ticks back up, especially
while the Chinese yuan is softening, Japanese stock values reel.
Capital links are so sensitive these days, after years of addiction to easy cred-
it, that even the hint of a tougher line at the Fed or the European Central Bank
can send shock waves to the farthest reaches—remember the “taper tantrum”
of 2013? There’s been such a renewed burst of debt, such a tendency to rely on
money creation as economic oxygen, that even if easing policies don’t seem to
work, there is oicial skittishness about changing them. God forbid letting vot-
ers weigh a return to monetary normalcy.Dare Not Taper?
Tim Ferguson
Editor, forbes asia
[email protected] PABLO BLAZQUEZ DOMINGUEZ/GETTY IMAGESEasy, now: May with Spain’s Mariano Rajoy.