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Global economy caught in monetary easing trap

Fiscal policy if followed now will increase public debt, augmenting net interest payments and forcing the trap to snap.

Published Thu, Dec 10, 2015 · 09:50 PM

THE US Federal Reserve contemplates an interest rate hike, bringing quantitative easing to an end.

The European Central Bank has just confirmed that it continues to pump money into the economy aiming at further stimulating growth. Odds are high for China to move towards zero interest rates in the course of 2016. Japan's central bank has no room to manoeuvre, faced with an economy in technical recession.

Central banks apparently pursue discordant policies.

US growth looks good on the surface, but dig a little bit deeper and demography plus productivity point at a trend growth of 2.5-3 per cent in the years to come.

Recent 2015 growth forecasts for European Union hover around 1.5 per cent, maybe a bit higher around 2 per cent for…

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