by Rupert Steiner
23 June 2013
from DailyMail Website
 

 

 

 

Central Banks Told Enough is Enough

in A Call that Says Continued Stimulus Measures

will 'Hurt' Financial Stability
 

 

Governments around the world, including the UK, have been warned in an influential new report to stop relying on their central banks to kick-start growth.

Just days before Sir Mervyn King (pictured below) hands over the keys of the Bank of England to successor Mark Carney, the Bank of International Settlements (BIS), which represents the world’s central banks, said its members have already done enough to aid a recovery and more stimulus measures would only hurt financial stability.

In the same week that Ben Bernanke - chairman of America’s Federal Reserve - signaled an end to quantitative easing, BIS called for banks to step back.
 

 

Passing the baton:

Outgoing Bank of England governor Sir Mervyn King

has now handed over its reigns to Mark Carney
 

At its annual meeting in Basel, BIS general manager Jaime Caruana said:

‘Extending monetary stimulus is taking the pressure off those who need to act. Ultra-low interest rates encourage the build-up of even more debt. In fact total debt, private and public, has generally increased as a share of GDP since 2007.’

In its annual report BIS said:

‘After all, cheap money makes it easier to borrow than to save, easier to spend than to tax, easier to remain the same than to change.’

Caruana lambasted firms and households as well as the public sector for not making good use of the time bought by ‘ultra-loose’ monetary policy.

He said this had ended up creating new financial strains and delaying rather than encouraging necessary economic adjustments. BIS, also known as the central bankers club, was one of the few organizations to foresee the global financial crisis that erupted in 2008.

Caruana said:

‘Since the beginning of the financial crisis, central banks have supported the global economy with unprecedented measures.

‘Without these forceful and determined policy responses, the global financial system could have easily collapsed, bringing the world economy down with it.

‘But easy financial conditions can do only so much to revitalise long-term growth when balance sheets are impaired and resources are misallocated on a large scale.

‘Central banks have borrowed the time that the private and public sectors need for adjustment, but they cannot substitute for it.’

In its main economic review for the year, BIS points out that since the beginning of the global financial crisis, robust, self-sustaining growth still eludes the global economy and governments need to use a different mix of policies to achieve it.