Friday, June 17, 2016

The Central Banks 
Have Lost Their Magic Powers
Economist Satyajit Das observes the increasing doubts about central banks' powers & their ability to deliver an economic recovery .. "Policymakers have engineered an artificial stability. Budget deficits, low-, zero-, and now negative interest rates , and quantitative easing (QE) have not restored global growth or increased inflation to levels necessary to bring high-debt under control. Instead, low rates and the suppression of volatility have encouraged asset-price booms in many world markets. Since prices of assets act as collateral for loans, central banks are being forced to support these inflated values because of the potential threat to financial institutions holding the debt. As the tried and tested policies lose efficacy, new unconventional initiatives have been viewed by markets with increasing suspicion and caution . Policymakers are also unable to defend their actions. They rely on contra-factual arguments, asserting that their policies are successful because in their absence things would have been worse. What is clear is that the loss of faith in central banks poses a significant threat to the stability of the global economy and markets."
LINK HERE to the essay

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