Fed 0 interest rate or trigger a new round of global asset bubbles

For the past 14 months, the Federal Reserve has kept the federal funds rate, the interbank interbank rate, at the historic lowest level between 零到0.25%.　　　　Analysts warn that the Fed's unprecedented "0 interest rate" policy has triggered an unprecedented "dollar speculative carry trade" that poses a new and huge systemic risk to world economic and financial stability. The mother of speculation in the summer of 2007, after the U.S. subprime mortgage crisis, in order to stimulate economic growth, the Federal Reserve slashed interest rates, gradually reduced from 5.25% to 零到0.25%.　　Since December 16, 2008, the Fed's "0 interest rate" policy has continued to this day.　　In the process, investors get the cost of dollars to reduce significantly, they began to borrow heavily into the U.S. dollar, to invest in equities, gold and other assets, and many of the U.S. dollar "hot money" into higher interest rates in emerging economies, pushing up the latter's stock market, housing prices. Roubini, a professor of economics at New York University, known for its success in predicting the international financial crisis, says global equities, crude oil and other commodity prices have all risen since March 2009, while emerging economies ' asset classes, including equities, bonds and currencies, have risen more sharply,　　In addition to the improvement in the fundamentals of the world economy, the more important factor is the "dollar speculative carry trade". "The dollar has become a major financing currency for carry trades as the Fed continues to keep interest rates at a lower level and is expected to continue this policy for a long time to come," he said, known as Dr Doom.　　He warned that the "dollar speculative carry trade" is becoming the mother of all arbitrage trading and the mother of all asset bubbles.　　　　If the dollar's borrowing costs rise, Roubini predicts, the "dollar speculative carry trade" will reverse and a large amount of money will be withdrawn from riskier assets, which will eventually lead to a sharp fall in the prices of these assets and a bursting of the bubble. A cautionary tale of America's loose monetary policy "all-cash" the world economy has long been a cautionary tale. In the first few years of 21st century, when the US economy last saw a recession, the Fed also slashed interest rates to spur growth.　　At the time, the US economy, though rapidly emerging from recession, has buried its roots in the subsequent US housing market bubble. In 2001, the US economy plunged into recession as a result of the bursting of the technology bubble, the terrorist attacks and the financial scandals of listed companies.　　Mr Greenspan, then chairman of the Federal Reserve, created a "standard operating procedure" for seemingly coping with the recession: cut interest rates, cut interest rates and cut interest rates until the economy recovers quickly. From January 3, 2001 to June 25, 2003, the Federal Reserve cut interest rates 13 times, lowering the rate from 6.25% to 1%, the lowest level in 40 years, and keeping the rate down to June 30, 2004.　　On the face of it, the US economy is rapidly emerging from recession. Over the next few years, many people believe that the Fed by virtue of its strong technical analysis and pre-judgment ability, has fully mastered the economic operation of the law,Since the crisis and recession will be history, prosperity will continue.　　January 31, 2006, the Federal Reserve for more than 18 years of Greenspan, "glorious retirement."　　In the summer of 2007, nearly 1.5 years after the Fed's retirement, the US housing bubble eventually burst and the subprime crisis erupted and eventually turned into a global financial crisis. In the midst of the international financial crisis, it was blamed on Mr Greenspan's efforts to stimulate the US economy out of the last recession through low interest rates, blowing up bubbles in the US housing market and eventually triggering a global financial tsunami.　　　　Greenspan's career has been overshadowed.　　A dilemma the Fed will continue to keep interest rates low for a considerable period of time, given the low utilization of resources in the US and the stability of inflation expectations, according to the minutes of the Federal Reserve's last meeting on monetary policy decisions released February 17. Roubini said the Fed's loose monetary policy would pose a dilemma for emerging economies. As the "Dollar speculative carry trade" continued to develop, the inflow of "hot money" led to increased pressure on currencies of emerging economies to appreciate.　　The central banks of emerging economies either do not intervene, allowing their currencies to appreciate, thereby further fuelling "hot money" inflows, or intervening through open market operations to curb the excessive appreciation of their currencies against the dollar, will lead to a "involuntary" easing of their monetary policy, further fuelling their own asset bubbles.　　　　In summing up the lessons of the international financial crisis, emerging economies have suggested that the regulation of macro-economic policies of major reserve currency issuers should be strengthened, but it is "easier said than done".　　The link to the so-called "dollar speculative carry trade" means that after the Fed's "0 interest rate" policy, investors borrow dollars at a lower cost to invest in other higher-yielding assets. At present, under the slogan of stimulating U.S. economic growth, the Fed has been extending the implementation time of the "0 interest rate" policy. Emerging economies, unable to exert the necessary influence on us macroeconomic policies and monetary policy, can only rely on their own efforts to avoid the bursting of a possible global asset bubble. This unfairness also amply illustrates that the problem of improving global economic governance remains prominent.