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And add to the confusion the fact that inflation remained quite low. So this money really went straight from central banks to financial assets, without ever rea

• btilly 8y ago
  Everyone is playing kick the can. A more sane economy is unlikely to outgrow the existing (at least one paper), so that isn't a viable route out. What's left is that some day, one of the financial disasters turns into a real collapse. We're talking a sufficient run on the banks that people stop believing that banks really have money. The last time this happened was 1933, and it was resolved by FDR closing all banks, auditing their books, deciding which to save, and then opening them up again. Given our tighter electronic integration these days, the complications are likely to be greater. Think credit cards being refused, ATMs not working, and general chaos. For values of chaos that include people not knowing if their employers can pay, or how to buy food in supermarkets. The possibility of that happening was the nightmare scenario that was used to convince lawmakers to pass TARP a decade ago. And it is a nightmare with a low but non-zero probability of happening each crisis. Unfortunately every time we face that threat and successfully get rescued the markets become more convinced that big players will be rescued the next time as well. Which encourages more extreme financial brinksmanship and makes the next crisis more likely. That phenomena is called "moral hazard". See also "too big to fail".