Faulty Monetary Policy of US The rapid increase in food prices {11% in large developing countries as against 4.5% in 2006} has been a direct result of faulty monetary policy of US and it’s counterparts in the other major economies. The rapid cut in interest rate has resulted in increased liquidity. The only exception has been the European Central Bank and their sanity has made the Euro stronger and has replaced the dollar in many international transactions. The policy of price control seems to have more political merit than economic merit. The increase in price encourages the producer to produce more and the consumer to consume less and thereby bring the prices down. Price controls will only encourage people to hoard resulting in artificial shortages and causing social and political unrest. The best way of stabilizing food prices is to waive off all the import taxes on food items.
This entry was posted on Saturday, February 16th, 2008 (I migrated from blog.co.in)
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