Thursday, September 20, 2012

Central Banks Make Historic Turn

Writes Anatole Kaletsky in Reuters (2012, September 19):
When the economic history of the 21st century is written, September 2012 is likely to be recorded as a defining moment, almost as important as September 2008. This month’s historic events – Ben Bernanke’s promise to buy bonds without limit until the US returns to something approaching full employment, Angela Merkel’s support for the European Central Bank bond purchase plans and the Bank of Japan’s decision to accelerate greatly its easing program – may not seem earth-shattering in the same way as the near-collapse of every major bank in the US and Europe. Yet the upheavals now happening in central banking represent a tectonic shift that could transform the economic landscape as dramatically as the financial earthquake four years ago.
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I tend to believe that global austerity measures have yet to run their full course, especially in public sectors. Nevertheless, all indications are that central banks are seeking ways to inject liquidity into the global economy in ways that will foster consumption. Quantitative easing to date in the US has been about capitalizing producers and bankers. In contrast, QE3 appears to be solidly focused on creating demand, which is a major change...

Source: Kaletsky, A (2012, September 19), Central Banks Make an Historic Turn, Reuters.

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