Originally published at South China Morning Post | July 16, 2015
In his Pulitzer-Prize-winning book, Lords of Finance, economist Liaquat Ahamed tells how four central bankers, driven by staunch adherence to the gold standard, “broke the world” and triggered the Great Depression. Today’s central bankers largely share a new conventional wisdom – about the benefits of loose monetary policy. Are monetary policymakers poised to break the world again?
The unprecedented period of coordinated loose monetary policy since the beginning of the financial crisis in 2008 could be problematic. Indeed, the discernible effect on financial markets has already been huge.
The first-order impact is clear. Institutional investors have found it difficult to achieve positive real yields in any of the traditional safe-haven investments. Continue Reading