{"id":30194,"date":"2018-01-26T08:01:56","date_gmt":"2018-01-26T13:01:56","guid":{"rendered":"http:\/\/olduvai.ca\/?p=30194"},"modified":"2018-01-26T08:01:56","modified_gmt":"2018-01-26T13:01:56","slug":"will-monetary-policy-trigger-another-financial-crisis","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=30194","title":{"rendered":"Will Monetary Policy Trigger Another Financial Crisis?"},"content":{"rendered":"
\n
<\/picture>Getty Images<\/span><\/figure>\n<\/div>\n
\n

Will Monetary Policy Trigger Another Financial Crisis?<\/a><\/h3>\n
\n
Sustained unconventional monetary policies in the years after the 2008 global financial crisis created the conditions for the second-longest bull market in history. But they also may have sown the seeds of the next financial crisis, which might take root as central banks continue to normalize their policies and shrink their balance sheets.<\/p>\n<\/section>\n
\n

LONDON \u2013 Former US President Ronald Reagan once quipped that, \u201cThe nine most terrifying words in the English language are: I\u2019m from the government and I\u2019m here to help.\u201d Put another way, policymakers often respond to problems in ways that cause more problems.<\/p>\n

Consider the response to the 2008 financial crisis. After almost a decade of unconventional monetary policies by developed countries\u2019 central banks, all 35 OECD economies are now enjoying synchronized growth, and financial markets are in the midst of the second-longest bull market in history. With the S&P 500 having risen 250% since March 2009, it is tempting to declare unprecedented monetary policies such as quantitative easing (QE) and ultra-low interest rates a great success.<\/p>\n

But there are three reasons for doubt. First, income inequality has widened dramatically during this period. While negative real (inflation-adjusted) interest rates and QE have hurt savers by repressing cash and government-bond holdings, they have broadly boosted the prices of stocks and other risky financial assets, which are most commonly held by the wealthy. When there is no yield in traditional fixed-income investments such as government bonds, even the most conservative pension funds have little choice but to pile into risk assets, driving prices even higher and further widening the wealth divide.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/section>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Getty Images Will Monetary Policy Trigger Another Financial Crisis? Sustained unconventional monetary policies in the years after the 2008 global financial crisis created the conditions for the second-longest bull market in history. But they also may have sown the seeds of the next financial crisis, which might take root as central banks continue to normalize […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[18154,124,8222,534,8402,661,8701,662,8625],"class_list":["post-30194","post","type-post","status-publish","format-standard","hentry","category-economics","tag-alexander-friedman","tag-central-banks","tag-great-financial-crisis","tag-monetary-policy","tag-project-syndicate","tag-qe","tag-qt","tag-quantitative-easing","tag-quantitative-tightening"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30194","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=30194"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30194\/revisions"}],"predecessor-version":[{"id":30195,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30194\/revisions\/30195"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=30194"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=30194"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=30194"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}