Central Bank Interventions: Drunks Searching by the Light

Central banks may have gone too far in defying market forces with quantitative easing, stimulus spending and increased liquidity, argues Chan Akya for Asia Times. Loose monetary policy kept many in high-risk assets too long. Some investments are in bubble territory: “With the primary purpose of quantitative easing namely to kick start the economy absolutely failing to deliver its intended results, all we are left with is a mountain of (new) debt, higher asset prices and continued overcapacity that was funded by the first tranche of debt,” he notes. “Attempting to borrow one’s way out of a debt crisis is like trying to drink one’s way out of alcoholism or eat one’s way out of obesity.” He points out some economies are in demographic decline. Reduced prices do not necessarily increase demand. Increased government spending contributed to volatility, fears of future tax hikes, and populist politics. He urges a gradual return to normal interest rates to discourage reckless borrowing – YaleGlobal