Free interest rates

Letter to The Economist, London, UK on Aug. 8, 2013:

Good evening.

In partially freeing up interest rates, the Chinese have yet again shown us that they know something we don’t, viz, that laws of nature cannot be subjected to legislation.

King Chanute knew this 1,000 years ago; and furthermore was sufficiently prescient not to have built a nine metre high wall just behind his throne as he sat commanding the tide to stop rising.

Please have your best analyst provide us with the scenario (like your excellent China one on p. 61) that would follow from an action of some major Western nation – say the USA – in freeing interest rates.  What would be the appearance of the tracks in the wet paint leading out of the corner into which we have painted ourselves with our fixed interest rates?  Or, to mix metaphors even more outrageously, what sort of scaling ladder would King Chanute have needed, who would be pouring what kind of boiling oil down on him, and would he have made it over the wall?

Cheers,

F.

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