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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.

US Federal Reserve chairwoman Janet Yellen testifying before the House Financial Services Committee on Capitol Hill in Washington, DC, in November. Net interest burden runs at 1.3 per cent of gross domestic product. According to the Congressional Budget Office, it will rise to 2.8 per cent in 2025. Forecasts depend on economic growth, total federal deficits, and the interest rate.

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...

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