The world will be unable to fight the next global financial crash as central banks have used up their ammunition trying to tackle the last crises, the Bank of International Settlements has warned....Gee, governments might have to pull out their Keynes and rely on fiscal instead.
Oh wait, it gets worse.
This problem [of low interest rates] is compounded as the world’s populations continue to age, the organisation warned, making debt burdens harder to bear. Yet politicians have relied too much on temporary growth boosts by using debt, rather than making painful choices, said the BIS.Clueless.
Mr Caruana said that during booms, workers and capital are shifted to slow-growing sectors, with a “long-lasting negative” impact on productivity growth. “Misallocated labour needs to move from these sectors to other parts of the economy,” he said.
The BIS said that the current turmoil in Greece typified the kind of “toxic mix” of private and public debt being used as a solution to economic problems, rather than making the proper commitment “to badly needed” structural reforms.
Mr Caruana said that policymakers must now focus on the supply side of the economy, introducing the right reforms, rather than continue to lean on debt which will inevitably undermine growth.
The Telegraph
The world is defenceless against the next financial crisis, warns BIS
Peter Spence, Economics Correspondent
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