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Stephen King: Why monetary stimulus has not done its job

It wasn’t supposed to be like this. Monetary stimulus — whether through lower interest rates or, as rates fell to zero, quantitative easing — was designed to lift asset prices with the hope that, eventually, they would stimulate faster economic growth and higher rates of inflation.

The good news is that copious quantities of monetary stimulus prevented the Great Recession from turning into a second Great Depression.

Although central bankers succeeded in pushing asset prices a lot higher, the link between price gains and underlying economic performance proved to be much weaker than had been assumed.

For all the talk of deleveraging, debt is an even bigger problem now than it was on the eve of the Lehman crisis.

Stephen King, FT Jan 21 , 2016

Stephen King at IntCom

Leverage and Deleveraging

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