Satyajit Das has written an excellent article in Bloomberg which clearly details the risks facing the global financial and monetary system and how central bankers are out of monetary ammunition and weapons.
“No one likes to admit defeat. But global policymakers, who continue to insist that there’s more they can do to revive growth and inflation, are starting to sound like Monty Python’s Black Knight (click link to see video), the limbless and mortally wounded warrior who threatens to bleed on his victorious opponent. The truth is that governments and central banks have very few weapons left — and have probably lost any chance they once had of averting a prolonged stagnation. Continue reading
Negative interest rates, which central banks in several countries have implemented as a way to spur economic growth, is a radical move. In the last of a three-part series, ‘Negative Thinking,’ commentator Satyajit Das examines this policy and its risks.
Low rates are supposed to encourage debt-financed consumption and investment, feeding a virtuous cycle of expansion. They also increase wealth, encouraging spending. Low rates and abundant liquidity should drive inflation.
Instead, these policies since 2008 have brought the global economy a precarious stability at best, and have not created economic growth or inflation. Continue reading