Bank For International Settlements (BIS) Slams Keynesian Money Printers…….Again!

Our lens suggests that the very low interest rates that have prevailed for so long may not be “equilibrium” ones, which would be conducive to sustainable and balanced global expansion. Rather than just reflecting the current weakness, low rates may in part have contributed to it by fuelling costly financial booms and busts. The result is too much debt, too little growth and excessively low interest rates. In short, low rates beget lower rates.

From the BIS annual report released 6-28-2015

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Low rates beget lower rates. Who woulda thunk it? Central bank policy may not be the answer but may well be part of the problem. Based on what I’ve read so far, the folks who write the BIS annual report believe that lousy monetary policy is the main problem, if far from the only one, facing the global economy. Of course, that isn’t exactly a revelation since they basically said the same thing last year. And the year before. And way back at the turn of the century and for almost every year since.

The folks down at the BIS are not known for their sunny outlook and until something changes with the way global economic policy is made that seems unlikely to change. One should consider though that BIS analysis, while not the greatest market timing tool, has the advantage of having been largely right since it first started warning about these global financial imbalances way back in the late 90s, long before it became fashionable. They were talking about secular stagnation – they didn’t have the good sense to come up with a snappy name for it – way before Robert Gordon and Larry Summers. And unlike those two pessimists they offered a reasonable explanation for it and a prescription for fixing it. Not one that anyone liked or that

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