This is especially worrying because it means that, despite holding its own rates to record lows and feeding money into the economy through quantitative easing, the Bank of England is ever less able to offset tight fiscal policy with loose money.
The central bank, which has kept interest rates high to offset lax fiscal policy, is in a policy bind: even higher rates might attract a destabilising amount of speculative capital, while lower rates would fuel domestic demand and imports, pushing the current-account deficit higher.
If it does nothing, the Fed runs the risk that, when Wall Street does eventually fall, inflation will be rising and the dollar falling, making it harder to ease monetary policy to offset the effects of a crash.
This does not mean that monetary policy alone can offset the contractionary effect of the current massive disruption in the credit markets.
The historical data used to predict recessions in the past are less useful if a new shock cannot be offset with fiscal and monetary policy.
And does he believe as a matter of policy it should not be offset with any spending cuts, it should be added to the deficit?
Rather than being seen as a sign of desperation, this should be viewed instead as a mid-course correction to offset the impact of the restrictive monetary policy that the country has implemented over the past two years.
So is France also trying to offset the damage of excessive spending with good policy in other areas?
Much will depend upon whether the Bank of England can keep monetary policy as loose as possible, to offset the big fiscal tightening.
As a result, Brazil has adopted a policy to keep local interest rates high to offset a very lax fiscal stance.
To offset weak economic conditions, the Fed's principal policy objectives appear to be twofold: suppress interest rates and raise stock prices.
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To offset that, the Bank of England needs to tighten monetary policy.
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The impact on savers is always a partial offset to the benefit to borrowers of a low interest rate policy, but this combination has gone on too long.
Big cash injections by central banks had helped offset the worst effects of this cash hoarding, bringing overnight lending rates down toward policy targets.
As the Tax Policy Center demonstrated, there simply are not enough deductions to eliminate in order to offset the gross tax savings resulting from a reduction in the top rate to 28%.
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An alternative to relying on supply-side reforms to offset austerity is for countries that have a bit more room for fiscal manoeuvre to adopt a more expansive policy approach via fiscal stimulus.
The obvious policy response is intervention to cap the sterling rate, build up foreign-exchange reserves, and offset the monetary effects by issuing sterling debt.
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