Volcker’s best apprentice

by Dave

Asia Times Online

Brazil, … Foreign debt has halved as a percentage of GDP since 2002, while the government’s finances are in only modest deficit. Foreign investment is encouraged and its rights protected. Most impressive, while inflation is around 6%, because of high commodity prices, the benchmark Selic interest rate has just been raised to 13%. At that level, inflation will be squeezed out of the system and excessive borrowing will be discouraged.

Thus when the commodities boom from which Brazil has benefited deflates, Brazil will be able to lower interest rates and continue domestic expansion without fear of running out of money. The Nobel Committee really needs to give a prize for monetary policy; there can be no question that Brazil would win
it and deservedly so.

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