This piece was reprinted by OpEd News with permission or license. It may not be reproduced in any form without permission or license from the source.
For over two decades, the Bank of Japan (BOJ) printed money "like crazy." In 2008, when crisis erupted, BOJ's balance sheet already was bloated. It totaled 20% of Japan's economy. Now it's about 30%.
Germany's 1920s hyperinflation resulted from similar monetary madness. Easy money in America under Greenspan was bad enough. Bernanke made him look tame. Since 2008, he more than tripled the Fed's balance sheet from about 6% of GDP to 20%, and hasn't quit yet.
The Bank of England (BOE) matched the Fed. Perhaps it feels what's good for the goose is good for the gander. Good for what must be asked? Bankers and corporate giants had a party. Ordinary households were entirely left out. Potentially an unprecedented train wreck approaches.
Since 2011, the European Central Bank (ECB) led the money printing global race. Its balance sheet expanded to almost 30% of GDP for 17 member countries. Each dissimilar from the others, they're paying a collective price.
PIMCO's Mohamed El-Erian sounded an alarm asking what happens if central banks fail? They flooded Western economies and Japan with money irresponsibly. El-Erian believes they "no longer" should keep doing it. Their policies are losing effectiveness. Greater "collateral damage and unintended circumstances" are increasing.
While short-term liquidity infusion effects are clear, longer-term ones raise concerns. Bottom line, says El-Erian, is that "central banks can no longer - indeed, should no longer - carry the bulk of the policy burden."
"Rather, it is a recognition of the declining effectiveness of central bank tools in countering deleveraging forces amid impediments to growth that dominate the outlook." It's also about growing risks too great too ignore. "(S)afe deleveraging" must replace years of monetary madness.
The global system's "Western core" weakened and "multilaterism is challenged." Central banks may have built "expensive bridges to nowhere." Ripple effects from are felt globally. Their "ballooned" balance sheets are dangerously overstretched.
Debt crises persist. Economies are bailout dependent. Policies so far avoided crashes. At issue is for how long? Europe is especially troubled. Zombie Greece awaits its obituary to be written. Portugal's on the verge of cratering. Spain and Italy aren't far behind. France and Britain are weak. Germany, the continent's underpining, shows disturbing signs.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
2
1
1
