Raising interest rates delivers a triple whammy

We should interpolate here too that higher interest rates mean higher public outlays on public debt. That is an argument for minimising public-finance instruments, such as interest-bearing bonds, which require the government to pay interest; and for maximising the amount of public finance which is interest-free. Just as one example, interest payments by the United States Government on its enormous public debt are one of the largest items in the annual federal budget and one that is likely to grow dramatically in the future, becoming an ever more devastating element of self-destruction of the productive American economy.

Those are fundamental issues; but they are not the only ones. One overwhelming concern at the present time - and one that is likely to reduce the world economy to a shambles if it is not effectively addressed - is asset-price inflation as distinct from consumer-price inflation.

The free flow of domestic and international funds, hugely invigorated by such modern devices as the carry trade, credit derivatives, hedge funds, private equity and the rest, has created a speculative frenzy which none of the traditional instruments of management is able to control.

Moreover, nothing has been, or is being, done to devise new means of managing the flow of funds - or the flow of "liquidity" or credit - in any way sufficient to avoid what promises to be the most monumental financial bust of all time. This bust will be global but it is most likely to hit hardest those who have been most uninhibitedly caught up in the rake's progress of modern finance capitalism and to have the least effective means of financial and economic management.

Let us be clear that the advocacy of effective management of the flow of funds, domestically and globally, is not to advocate the destruction of capitalism but, on the contrary, to advocate effective means of preserving the essential nature of an economic system which has brought enormous benefits - along with enormous risks - over the past three centuries.