A pivotal role for banks to avoid financial crises

A pivotal role for banks to avoid financial crises


1/30/16

Says Mohamed El-Erian, an economist in the newly released book The politicians have failed to implement the reforms because they are totally dependent on the central banks to stimulate the economy.
 
Abdul Ilah prepare glorious: the past seven years was an exceptional period in the work of central banks. They did not cut interest rates to zero, even to less than zero as the Bank of Japan did, for example, in developed countries, but proceeded for the first time in its history, to expand its remit to buy government bonds and other assets. The majority of economists agree that drastic action was needed in the wake of the 2007-2008 financial crisis to avoid a repeat of the late twenties of the last century happened, or what is known as the "Great Depression".
The only game
But the size of such a monetary stimulus and the nature of the long-standing now become a source of concern for economists wondering whether central banks proceeded to permanently distort the economy.
Was Mohamed El-Erian, a former economist at the International Monetary Fund and former president of the management group Pimco bond funds, the last to ring the alarm bells in this regard. Believes that central banks avoided the occurrence of enormous human suffering, "but failed to generate what the Western world really need, which is a combination of permanent and comprehensive growth, high rates of real and financial stability", in his book "The only game in town: the central banks and the lack of stability and to avoid the next collapse ", The Only Game in Town: Central Banks, Instability and Avoiding the Next Collapse, reviewed by" The Economist "magazine.
Also became politicians rely on central banks to provide the main source to stimulate the economy, says El-Erian, saying they failed to implement the reforms is urgently needed because of this dependence, and that the period of protracted of easy monetary policy lifted stocks prices increased so the proportion of inequality in the distribution of wealth.
Also arranges for it to get ready for the feet of the financial risk (in other words, speculation in the market) is now greater than the desire of companies in foot on the risks of increased investment.
Long-term unemployment
Other problems which is talking about in his book Al-Arian's long-term high unemployment rates and the loss of confidence in governments and the lack of economic policy coordination. El-Erian argues that the global economy is rapidly approaching a crossroads in opposite directions, a road leading to high growth rates and reduce financial risk and reduce inequality, and through all these measures leads in the wrong direction.
It commends the Economist magazine accurately Erian in diagnosing problems and propose inter necessary to solve measures, including the renewal of the education system and strengthen the infrastructure and improve the competitiveness of the labor market and the flexibility and bridge tax loopholes and increasing the marginal tax on the rich rates to reduce inequality. Says: "More detail is required, not just the titles of these measures. The development of the education system, for example, it is a good idea but it needs to decades ago that the children of today affect schools in labor productivity."
El-Erian also calls for the book to a new thinking to deal with the junction leading to opposite directions. According to The Economist magazine El-Erian is right in his call for employers to adopt diversity in the operation of labor, though this issue does not belong to a book on the central banks.
The central banks did her best to help, and politicians should assume the task of driving growth in the long run, but no one agrees on what needs to be done precisely, as The Economist magazine notes in its review of the book.
 


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