The Cost of Cheap Money

Ten years ago the global economy was in the midst of what we now call the great financial crisis. Starting in 2008 and for the following eight years central banks and governments reached into their economic policy medicine chests for bottles labelled “economic stimulus.” They administered this medicine—especially the one called “easy credit”—in prodigious quantities until finally, in late 2016, the world economy started to show signs of sustained growth. During 2017, as the global economy grew more robustly, central banks—in particular the Federal Reserve in the United States—began to reduce the dose of “easy credit” by starting to raise their policy interest rates and slowing or stopping their purchases of bonds. And they have indicated they will further reduce, though slowly, the doses of “easy credit” medicine they administer in 2018 and 2019. As a result international financial authorities have warned that the global economy could suffer withdrawal pains in the form of...