In the last three plus years, central banks have had little choice but to do the unsustainable in order to sustain the unsustainable until others do the sustainable to restore sustainability!


In the U.S., Fed measures need to be supplemented by actions in the following key areas: the labor market, public finances, housing and housing finance, credit intermediation, education and investment in social sectors and infrastructure.

Some good turkey being talked here, but what El Erian misses is that federal/national governments are not exactly well-equipped to deal with these problems either. Most in the West (plus Japan) are sitting on demographic timebombs that have started exploding, rendering it virtually impossible to balance the imbalances in their economies fiscally. This puts the onus back on central banks to monetize spending.

E.g., if the US were to rebalance the housing market, it would probably have to monetize about a trillion dollars in underwater housing (i.e. with principal reductions), either that or print enough money to get the stock of property back above loan balances. That doesn't exactly "solve" things more profoundly than central bank quantitative easing.

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