Ubuntu chief decries interest rate cut

Fed Chairman Ben Bernanke shouldn't have pressed the "morphine button" Tuesday, Canonical CEO Mark Shuttleworth argues.

Canonical Chief Executive Mark Shuttleworth, founder of the Ubuntu version of Linux, called Tuesday's interest-rate cut the "most extraordinary failure of economic leadership in recent years."

U.S. Federal Reserve Chairman Ben Bernanke cut interest rates 0.75 percent on Tuesday, but Shuttleworth derided the move as "press(ing) the 'emergency morphine' button" in a blog posting that indicates the open-source software executive also has an interest in macroeconomics.

Markets "are smart enough to see that all Bernanke has done is cover up the symptoms of malaise," he said and offered a gloomy forecast: "I expect that any relief will be brief, market recoveries will fade, the rout has been deferred but not averted."

Shuttleworth argues that former Federal Reserve Chairman Alan Greenspan was able to use the interest-rate cuts as a tool to avert U.S. economic troubles because the usual penalty of reducing interest rates, inflation, wasn't a factor. But he also argued circumstances have changed since then, and it was foolish for Bernanke to cut rates.

"With hindsight, it appears that the real reason for the absence of inflation (during Greenspan's reign) was that the Chinese were increasing their productivity dramatically, and that U.S. consumers were spending so much on Chinese goods that Chinese productivity growth, not U.S. productivity growth, was keeping U.S. prices low," Shuttleworth said.

Bernanke is using the same approach now, but this time without "the deflationary Eastern wind" from China, Shuttleworth said. "Greenspan made a mistake, and it will have huge consequences for the U.S. for a generation, but he had reasons for that mistake. Bernanke just blinked, he panicked, despite knowing better."

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About the author

Stephen Shankland has been a reporter at CNET since 1998 and covers browsers, Web development, digital photography and new technology. In the past he has been CNET's beat reporter for Google, Yahoo, Linux, open-source software, servers and supercomputers. He has a soft spot in his heart for standards groups and I/O interfaces.

 

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