Skip to comments.BIS: ultra low interest rates could make global economy permanently unstable
Posted on 07/02/2014 3:18:51 PM PDT by Lorianne
Ultra low interest rates and the failure of policy to "lean against" the build-up of financial imbalances are in danger of making the global economy permanently unstable, the Bank for International Settlements has warned.
In its annual report, the Swiss-based "bank of central banks" spelled out the risks of relying too heavily on monetary policy to stimulate the economy. The BIS warned that central banks including the Bank of England and US Federal Reserve could keep monetary policy loose for too long, with potentially damaging consequences.
"The prospects for a bumpy exit together with other factors suggest that the predominant risk is that central banks will find themselves behind the curve, exiting too late or too slowly," the BIS said on Sunday
"Systemic financial crises do not become less frequent or intense, private and public debts continue to grow, the economy fails to climb onto a stronger sustainable path, and monetary and fiscal policies run out of ammunition. Over time, policies lose their effectiveness and may end up fostering the very conditions they seek to prevent."
Claudio Borio, the head of the BIS's monetary and economic department, warned that the onset of another financial crisis could trigger a retreat towards protectionism that would "spell the end to the current open global economic order" as we know it.
(Excerpt) Read more at telegraph.co.uk ...
Each once-developed nation will either engage the currency war or lose the trade war.