Is there an English-speaking interest-rate hike sweeping the world? More important, will English-speaking economic growth principles rule the waves? Most likely, both are correct.
The Reserve Bank of Australia raised its policy rate a quarter of a percentage point this week, and the venerable Bank of England quickly followed suit. These precautionary moves to maintain price stability actually caused stock markets to rally in both countries. Using history as a guide, the U.S. Federal Reserve may be next in line to up its target interest rate.
It doesn't always happen, but U.S. rates frequently follow British rates. And while interest-rate futures are suggesting a Fed rate hike next winter, the Fed should follow rising real interest rates as economic growth, investment returns and jobs rapidly pick up steam in the Bush boom.
Of course, the English-speaking countries have more in common than interest rates. Freedom-loving Great Britain and Australia were of significant help to the United States in ridding the world of Saddam Hussein and fighting the global war on terrorism. Seeing them in stride with the United States economically is also a good thing -- particularly when they sound the pro-growth siren.
Aussie Prime Minister John Howard has led the way with his tax-cut and deregulation moves. This is why Australian unemployment is an enviable 5.6 percent. And in Britain, Finance Minister Gordon Brown has been teeing off on European Union (EU) bureaucrats for being completely wrong on growth policies.
Brown noted that the European Central Bank has only lowered interest rates seven times (compared to 10 for Britain and 1 for the United States). He's right -- EU monetary policy is too tight. While year-to-date gold prices in U.S. dollar terms have increased 10 percent -- indicating a looser monetary policy -- Euro gold is essentially unchanged on the year, despite the fact that the European economy is in worse shape than America's.
Filling out this strong position on growth, both Brown and Prime Minister Tony Blair have flatly told the European Union that Britain will never enter the Eurozone if English tax-and-welfare and labor-market regulations have to be harmonized with the European Union.
This would clearly be an economic step backward. The Margaret Thatcher legacy has given the United Kingdom a much more pro-growth tax-rate structure and an environment of social-service spending restraint. In addition, there is now a much more balanced labor-market/labor-union strike policy in Britain. This is why unemployment in Europe is about 9 percent, while British unemployment is 5.9 percent.
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