Should the Fed raise interest rates?

It is true that the American economy is again firing up: unemployment is down to 5%, 200 thousand jobs are being created each month, and wages are going up too. Many Fed economists believe, not without good reason, that this is the time to “step on the brake” and raise interest rates, probably next month. I believe this would be wrong. As a result of an unprecedented global corporate debt in excess of 3 trillion dollars, the global economy has not yet escaped the risk of another financial meltdown, and raising interest rates won’t make debt servicing easier without painful defaults all over the world. It is true that this debt was created by cheap money and lax monetary policies. It is also true that countries who have borrowed low and invested in local economies and in non-dollar-earning local assets, including real estate, have since earned a decent interest rate differential. Yet, raising US rates won’t solve the problem, no matter how the problem was created. Moreover, energy and commodities exporting countries, such as Russia and Brazil, are already feeling the pinch, in the face of a declining demand for commodities and low energy prices. If I had to put my money somewhere these days, I would definitely put it on India: A country growing at 7% with a relatively low dependence on the world economy (small exporter and massive importer of 'cheap' energy that helps its competitiveness). The precondition for doing so would be the speeding up of economic reforms, particularly of the financial sector, reducing bureaucracy, and privatizing state assets. As always in this world, there will again be winners and losers, depending on how successful is one in predicting the future and thus manage his risks. HH