The IMF is urging the ECB to implement massive quantitative easing, but such a course of action is unlikely to promote short-term economic growth and would risk creating bigger bubbles in many asset markets.
The recent drop in US unemployment to 6.1 percent has raised hopes for a stronger economy, even though analysis of the major features of the US economy since 2008—regarding growth, employment, wages, and investmen—shows that all are dismal, notwithstanding the recent modest pickup in monthly employment increases. America needs a stronger recovery.
This now has to have been the third time in the past 15 years that the Fed has blown asset price bubbles through its excessively easy monetary policy stance. And seemingly the Fed learns nothing from the subsequent bursting of these bubbles.
Simon Johnson says, “For more than a century, we have recognised that the availability of central bank liquidity support creates the potential for serious moral hazard.” Indeed it does – in fact, this has been understood for well over two centuries. But as the numerous recent crises have shown, we still do not know how to cope with it.
With governments’ obvious propensity to spy on the citizens, it would take a very bold faith, indeed extreme credulity, to believe that any government would make or keep an electronic currency anonymous.
Sadly, we live in a world of subpar economic activity where a global currency war could break out at any time. In such a world, the least that Congress should do is insist that it remains informed by the U.S. Treasury as to which countries are unfairly manipulating their exchange rates.
The European Central Bank is discussing whether it should for first time set negative interest rates for banks’ deposits with it, and may well do so at its meeting on June 5. This is a highly interesting development financially, but also intellectually.