The negative side effects of easy money are starting to grow and, at this point, central banks are doing more harm than good, said the former Chief Economist at the Bank for International Settlements (BIS).
In a phone interview with Financial Sense, William White, now chairman of the Economic and Development Review Committee at the OECD, discussed his recent Adam Smith Prize lecture, “Ultra-Easy Money: Digging the Hole Deeper?“, which he gave before the National Association of Business Economists.
Monetary Policy Failed to Stimulate Aggregate Demand
White said easy monetary policies were needed during the 2008 financial crisis in restoring confidence but then took a wrong turn around 2010 when attempting to boost economic growth.
‘The policy stakes are now very high’ since ‘ultra-easy policy has not stimulated aggregate demand to the degree expected.’
‘I see a curve where the efficiency of monetary policy goes down with time, and the harmful side effects of policy go up with time,’ White said. ‘At some point, those two curves intersect, and the central banks are doing more harm than good. My feeling is this has been the case for quite some time.’
This post was published at FinancialSense on 09/30/2016.