But what the Fed fails to recognize is how its distortion of the short rate for cash might be making it difficult to access capital.

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Moving to a single rate of VAT without exemptions would eliminate this distortion but it would also be regressive.

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The source of malinvestment, according to the Austrian theory, is the systematic distortion of the structure of production that has its origins in government manipulation of the interest rate.

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"It's more distortion in prices, and it's not clear how effective it will be at any rate, " said Rafael de la Fuente, chief Latin American economist at BNP Paribas.

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