Global interest rates are falling, and will fall dramatically. Alan Greenspan has already cut rates by 0.5%, with one surprise cut in between meetings of the Federal Reserve. And the Fed is going to cut some more this month.
Germany's Bundesbank has so far resisted calls from the new Social Democrat-led government and other centre-left European governments to cut rates to boost economic growth and jobs. But it is under growing pressure to act.
Japan's interest rates are already near zero. But the Bank of Japan is dead set on pumping life into a comatose economy. The BoJ's balance sheet has expanded by over 40% in the last two years. Reserve money is now growing at 12% year-on-year from a low of just 2% in the summer. And now the BoJ is to provide up £53 trillion ($340 billion) in loans to finance the huge injection of cash that the government plans in order to bail out Japan's collapsing banking system.
All this is designed to help avoid a global financial crisis. As I have argued before in this column, the crisis that began in Asia and then spread to the rest of emerging markets was not primarily transmitted by a slowdown in world trade flows, although that is one result.