Because of the breakdown of political decision-making in the United States and Europe during the Great Recession, the burden of response has fallen largely on two big central banks: the Federal Reserve and the European Central Bank (ECB). And down the road, they are going to pay for it.
The balance sheets of these institutions have ballooned as theyâ??ve pumped out cash â?? adding so many new obligations that some economists worry that the central banks may be sowing the seeds of the next financial crisis. And thereâ??s a policy mismatch: Using the finely tuned monetary system in a blunt-force effort to bolster the global economy has been a bit like using a gold watch to pound a nail.
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