One argument you often see being made by pundits today – particularly those who have a “secular stagnation” view of the world – is that there’s nothing to lose by conducting extreme monetary policy.
Given the risks involved in a deflationary world, it can’t hurt to fight it in any way possible.
But everything has consequences, and you can’t expect to keep interest rates at current levels without distorting the market in some way.
Bottom Line: I strongly believe that central bankers’ actions have put the global economy today in a very dangerous position.
Interest rates are too low. As a result, we’re seeing a replay of the mid-2000s – when interest rates were too low given economic growth, and as a result, the bubble in US subprime property was inflated. And when it blew up, it triggered the global financial crisis.
For More: Are we Facing an Economic Disaster?
Thank You,