“Central banks are being cornered into prolonging monetary stimulus as governments drag their feet and adjustment is delayed,” the Basel, Switzerland-based BIS said in its annual report, published today. “Both conventionally and unconventionally accommodative monetary policies are palliatives and have their limits.”
Palliatives eh? If you use big words most people won’t get what you said?
Central bank policy “buys time” in the short term for banks and governments to tackle debt overhangs, the BIS said. European finance ministers meeting in Luxembourg last week battled over strategies to contain the debt crisis. Leaders are due to hold a summit on June 28-29, which will be their 19th since the turmoil erupted.
But there has been no “tackling” of debt overhangs.
For four years we have basically played with ourselves and abused the “liquidity support.” All political parties have done so in all nations with debt problems — which is the entire western world.
No government, other than Iceland, has come out and said “bite me!” to the banksters. None of the governments involved have actually balanced their budgets. We’re not even pretending to here in the United States.
Incidentally, Iceland repaid their IMF loans ahead of schedule.
Gee, maybe we did it wrong — and they did it right?
The limits of policy were reached at the zero boundary. Now the question has become very simple — how long can what is being done now be maintained until something very ugly happens — something unforeseen, since the game being played right now is one of literal experimentation with the governments and peoples of the world. Nobody knows where the corners are with certainty nor what will happen when they’re exceeded.
But we do know that the outcomes will not be pleasant.