Central banks have been engaged in unprecedented monetary experimentation. Unlike scientists developing drugs, fear of the unknown has had no moderating influence on their activities. That in itself is alarming. Nor is it possible to reverse recent policies. Now governments must accept responsibility for resolving an incipient global solvency crisis.
The monetary stimulus provided repeatedly over the past eight years has failed to produce the expected expansion of aggregate demand. Debt levels have risen, especially in emerging market economies, constraining expectations of future spending and current capital expenditures. Consumers have had to save more, not less, to ensure adequate income in retirement.
At the same time, easy money threatens two sets of undesirable side effects.