#AceFinanceNews – BIS REPORT ON ECONOMIES – June 29 – Ultra low interest rates and the failure of policy to "lean against" the build-up of financial imbalances are in danger of making the global economy permanently unstable, the Bank for International Settlements has warned.
In its annual report, the Swiss-based "bank of central banks" spelled out the risks of relying too heavily on monetary policy to stimulate the economy. The BIS warned that central banks including the Bank of England and US Federal Reserve could keep monetary policy loose for too long, with potentially damaging consequences.
"The prospects for a bumpy exit together with other factors suggest that the predominant risk is that central banks will find themselves behind the curve, exiting too late or too slowly," the BIS said on Sunday.
It added that a "persistent easing bias" by fiscal, monetary and prudential policy-makers had lulled governments "into a false sense of security" that delayed needed consolidation and created a risk that instability could "entrench itself" in the system. "Policy does not lean against the booms but eases aggressively and persistently during busts," the BIS said.
"This induces a downward bias in interest rates and an upward bias in debt levels, which in turn makes it hard to raise rates without damaging the economy – a debt trap.
Once the balance of consumerism reaches a tipping point of scale and the debt ratio can no longer be controlled by raising interest rates, an economy will reach a free-fall situation, thus leading to collapse and decay of any capitalistic economy and building up further book debts will no longer be an option.
It is only at this tipping point that repayment or exclusion of debt by itself, becomes an option.
In so much as capitalism has already proven to those in so-called power, it no longer works, as the balance between the rich and the poor, will become a rebalance of societies want and need factors.
To rebalance any societal imbalance will then take a complete rethink of society or simply an agreement of bankruptcy, for the people, nations and countries becomes the only option.
We will have crossed the line between what we had, to what we have, and no longer can consumerism be the yard stick of an commerce.
As basing everything on spending, becomes nullified by the reason, and borrowing to pay tomorrow, becomes the cross everyone will finally have to bear.