BIS and IMF attacks on quantitative easing deeply misguided warn monetarists
Source: The Telegraph
The BIS enjoys huge prestige. It was the only major institution to warn persistently before 2008 that credit excess threatened to trigger a global crisis. The bank's monetary veteran Claudio Borio is esteemed by specialists as one of the world's most brilliant economists.
Mr Caruana said central bank largesse is distorting the financial system and storing up trouble for the future. It is also letting governments "kick the can down the road" and delay reform.
Similar arguments were made by the IMF in a working paper on "Unconventional Monetary Policies". While concluding that emergency action had prevented a deeper downturn, it said potency is "diminishing", and side-effects are becoming worse.
There are signs of a "mispricing of credit risk", a euphemism for asset bubbles. The longer it goes on, the harder it will be for central banks to extricate themselves. The IMF said losses from soaring bond yields -- and therefore falling values -- could reach 7pc of GDP for the Bank of Japan, 6pc for the Bank of England, and 4pc for the Fed.
Read more: http://www.telegraph.co.uk/finance/economics/10067080/BIS-and-IMF-attacks-on-quantitative-easing-deeply-misguided-warn-monetarists.html
It isn't mentioned in the article that pensions have brought flat returns due to QE. When interest rates are low, and free money is given to banks, the only people who profit are the bankers who can use the easy money to gobble up whatever they desire cheaply and speculate without consequence.
This article is an argument from bankers against the IMF and BIS advice. Generally, especially given the financial situation, I am unlikely to trust a word they say. Quite frankly I am apt to believe the opposite. I hope by now most Americans share that sentiment.
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