Following on from yesterday’s Annual Report by the Bank for International Settlements (BIS) warning against continued monetary stimulus by central banks, please find above an interesting interview on CNBC with the BIS’ economic adviser, Stephen Cecchetti, discussing the BIS Report and the risks associated with low-rates environments.
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While low interest rate causes distortions, the alternative is what? “Liquidate stock, liquidate labour, liquidate real estate”?? Let’s see their logic:
* Household debt is high
* Banks have lot of bad loans
* Businesses cannot make a profit
* Government deficit is high
* Raise interest rate
* ???????
* Economic Salvation.
So how exactly will raising interesting rate lead to economic salvation? Black Magic? Divine Intervention? World War 3?
No pain, no gain. They can’t keep the lamb whole and the wolf full.
“Are central banks living on borrowed time?”
Since debt is indeed “borrowed time”, that is a profound title.
To be completely accurate, one should say that they are living on usury charged for borrowed time.
Sounds like he is talking about Australia at the end.