Reserve Bank of India Governor Raghuram Rajan warned on Wednesday that the global economy bears an increasing resemblance to its condition in the 1930s
- Says advanced economies are trying to pull out of the Great Recession at each other’s expense
- Says competitive monetary policy easing has now taken the place of competitive currency devaluations as the favored tool for playing a zero-sum game that is bound to end in disaster
- “Demand shifting” has taken the place of “demand creation”
- The lack of coordination between policymakers is producing spillovers that may be difficult to control
More here: RBI’s Rajan Sees Risk of Financial Markets Crash
Worth a read (I particularly liked this bit:
- A sudden shift in asset prices could happen in a variety of ways, Mr. Rajan said. The most obvious route would be as a result of investors chasing higher yields at a time when they believe central bank policies will protect them against a fall in prices.
“They put the trades on even though they know what will happen as everyone attempt to exit positions at the same time – there will be major market volatility,” said Mr. Rajan.
Uh, yeah.
Why is this man smiling?
