euro

Chinese stock markets are in turmoil, with volatility spreading to Asia, Europe, and the US. Commodity prices, including oil, are plunging in response, and what had already been a sluggish global economy is suddenly threatening to collapse into full-blown crisis.

At the same time, central banks are running out of options to stop the rout. The Chinese authorities have tried in vain to calm markets since the jitters began, but interest rates are already at record lows. Beijing is rumoured to be preparing a huge cash injection, but for the past few years central banks have been pumping enormous amounts of liquidity into the global economy with only moderate results (and increasing concern that the extra cash is feeding unsustainable bubbles in property markets and other places).

Have markets lost faith in the ability of central banks to kick-start the economy? With conventional monetary policies exhausted, are there any alternatives to further rounds of Quantitative Easing? And can countries work together to find a solution, or are we headed for the currency wars and ‘beggar-thy-neighbour’ policies of the 1930s (with the same disastrous results)?

There are, perhaps, reasons to be cautiously optimistic over the long-term. China’s recent currency devaluation was not as large as it could have been, and low energy prices coupled with advances in technology (not to mention the great potential stored up in developing economies) mean that the conditions for robust growth do exist. Will it be enough?

Can central banks prevent another global crisis? Or are we returning to the failed policies of the 1930s? Let us know your thoughts and comments in the form below, and we’ll take them to policymakers and experts for their reactions!

IMAGE CREDITS: CC / Flickr – MPD01605


48 comments Post a commentcomment

What do YOU think?

  1. Jovan Ivosevic

    Question that should have been asked in 2009 when you turned the EU over to the high priestess of austerity Angela Merkel.

    America did an 800 billion dollar fiscal stimulus and our unemployment rate went down by half. Your growth unemployment rates are so sad you are in constant threat of deflation. Keep it up boys and girls.

    The sad part is you were all tricked. Germany didnt do austeirty for their own. Daimler workers all got government subsidies to remain employed even when there was no work during the worst of the recession, so they wouldn’t lose their skills or work habits. She took care of her own. But then she let the rest of you balance your budgets in the backs of the poor, the retired and the sick.

    Go visit your grandfather’s Graves and spit on them. You have already done that anyway by turning your governments over to the German foreign ministry.

  2. Oli Lau

    central banks and their monopolies are the problem, not the solution.

  3. Ulf Skei

    I hope they can. Because I seriously doubt any other actor in the arena of international trade and finance have the means.

  4. Ivan Burrows

    .

    Central banks only implement their government’s monetary policy so it is not the banks that creates a global crisis but the policies they have to follow.

    Since the ECB (via the European Commission & European Parliament) has forced the countries of the Eurozone to near bankruptcy already with borrowing costs close to being unsustainable if there is another global crisis most Euro countries are in for a very, very bad time.

    http://fortune.com/2015/07/17/europe-greece-italy/

  5. Richard Osborne

    Haha haha what a joke. The bankers themselves caused the crisis and we’re still stupid enough to ask them for advice

  6. Питащият

    http://www.theguardian.com/commentisfree/2015/aug/23/amazon-jeff-bezos-workers-rights-capitalism-employment-law?CMP=fb_gu 1930 ?! It comes something much worse than 1930. This depression will last at least half a century. It will be shallower, but more prolonged. The lessons of 1930 have not learned. http://www.bradford-delong.com/2015/08/none-of-concerns-about-inflation-employment-financial-stability-or-inequality-justify-raising-interest-rates-over-the-next.html Secondary savagery of capitalism, the decline of the welfare state and developed economies as a result of defects and effects of mad globalization can not be stopped by a single country or bank. Political globalization of countries and peoples is lagging behind economic globalization.

  7. Alessandro Mogavero

    There is an over confidence on the ability of monetary policies to fix these crises.
    Monetary policies are only a short term solution able to absorb same small shocks, nothing more.
    The real propellant of the economy is the research and the innovation, but the budget in this field is shrinking and shrinking especially in advanced countries.
    This is the real economy that we have to make work again, the money are made of paper, printing it cannot feed people.

  8. Paulo Especial

    YES! But for that to happen We must have a CLEAR VIEW of what is intended by the E.U. as a whole so that We can enpower our National Governments to cede sovereign power to the E.U. in this matter!

  9. Stelios Peppas

    If we are returning in the failed policies of 1930es, we should prepare also for a proletarian revolution (based on that Soviet Union didn’t “feel” crisis in its economy in ’30es due to the collectivist system) and for a radical nationalistic/ fascistic coup in several countries (coup that revived the corrupted and utterly destroyed industrial economies by investing in war production). Definitely, though, we won’t expect a sort of “New Deal” in Europe because in ’30es that happened in America…

  10. Jorge Machado

    EU has no goals, they are discussing everyday the problems from yesterday not thinking what to do tomorrow. EU is a failed program, a failed bunch of people with no preparation to be there, to choose the right and not to get involved with the big lobby. EU has failed

  11. nando

    NO, unless one stops current practices:

    There is a strong, albeit also a weak link, in the international financial system. It is called the “creditor of last resort”. This creditor is the one who ultimately pays for all the follies. Because follies, that is what all crisis are.

    When a private bank becomes insolvent there is a national central bank that injects money. But this creditor is not of last resort.

    When the national bank runs out of cash there are always supra-national banking systems (ECB, WB, IMF) that lend money to plug the holes in the balance sheet. But these are not creditors of last resort either.

    When the supra-national loans have to be paid, then the national banks, through their respective governments, activate their “creditors of last resort”. And these are the tax-payers who have no option but to pay up.

    For as long as the tax-payers continue being the “defenseless creditors of last resort” there will be no end to this charade called… call it whatever you want to call it… but typically this charade it is pompously called the international financial system.

  12. Nando Aidos

    NO, unless one stops current practices:
    There is a strong, albeit also a weak link, in the international financial system. It is called the “creditor of last resort”. This creditor is the one who ultimately pays for all the follies. Because follies, that is what all crisis are.
    When a private bank becomes insolvent there is a national central bank that injects money. But this creditor is not of last resort.
    When the national bank runs out of cash there are always supra-national banking systems (ECB, WB, IMF) that lend money to plug the holes in the balance sheet. But these are not creditors of last resort either.
    When the supra-national loans have to be paid, then the national banks, through their respective governments, activate their “creditors of last resort”. And these are the tax-payers who have no option but to pay up.
    For as long as the tax-payers continue being the “defenseless creditors of last resort” there will be no end to this charade called… call it whatever you want to call it… but typically this charade it is pompously called the international financial system.

  13. Manuel Cruz

    “Are we headed?” Come on… we have been there for quiet a while now…! It’s funny how “we” can not learn from history. Europe, namely Germany, has been so narrow minded the last years and has done everything in her sole interest that they will pay the price very soon. Like someone said they will replace one neurosis for another. Don’t get me wrong, i love many things in Germany, but in what “external” politics or european politics is concerned they keep the same old habits, they just can not understand and work with others, it is just their point of view and interests that must prevail. They are dooming the euro project all together. And if France thinks that a more profound union with Germany would work, let Hollande think again. The french people would never tolerate that in the end. Germany is destroying the euro project and they will pay in the end when they will have to go back to the mark. As to Asia, we will see if there will be a more serious crisis and perhaps war. We still have a time bomb tiking in Europe, so let’s not worry with that for now.

  14. Marian Nicuriuc

    When did ever Central Banks prevented anything from going haywire, individuals behind this simulacrum of financial system which governs our life’s on daily basis care not even a cent on a dollar about anyone else besides themselves so crisis are not being born out of nothing they are the product of their doing! World would be a much better place without Central Banks I dare say !

  15. Rui Duarte

    The ECB is too slow. Regarding Greece, for example, the ECB did more-or-less what it had to do, by the half-measure and two years late. DES NULS!

  16. Jacob JJacob Marris

    Neo liberalism and new order, in political and historical terms, have failed. And this is not the first time. It has happened before twice in the 20th century with slight differences. Unfortunately this is happening again and summing it up with the rise of ethnocentrism in Europe, the mixture is becoming dangerously explosive. I am afraid that the dies of history have rolled and we have crossed the Rubicon. The next four years will be critical.

  17. Jude De Froissard

    Communism failed and so does ultra liberalism. …the 2 extremes. ..the world has all the means to make everybody “happy”but because of some selfish incompetent persons…it is becoming more and more impossible to live a decent life.

  18. ironworker

    Good question however we don’t know yet the aftermath of previous crisis. I see a huge democratic deficit and a thinner middle class, less social benefits and less social everything, and not by chance, a richer elite (doesn’t apply to Germany and their satellites , they thrive as a whole, they are better then ever). Why next crises should be different than previous one ? We seen this movie before. Germany, and specifically the conservative CDU will “lead” the whole Europe thru crisis with France and others complicity. We all know what kind of “treatment” will be applied to all (less Germany) regardless. Austerity is good for you, makes you “strong” and “healthy” if you are lucky enough to survive. According to Merkel there is no alternative to austerity. So the Central Banks will follow.

  19. EU reform- proactive

    NO, think they are part of the plot- this is too complex & too sinister (shady characters like JP Morgan’s CEO Jamie” Dimon (who has a 4 star retired US general as “adviser”) – This CB, WB, IMF clique & other Pranksters probably control the cheating game! How evil/reckless is the “fractional reserve banking system” by creating money from thin air- than given (“free”) to com. banks & speculators?

    For transparency reasons shouldn’t all Central Banks change their name to ROTHSCHILD “controlled” CENTRAL BANKS- except for three: Cuba, North Korea & Iran? How true & controversial is that? http://humansarefree.com/2013/11/complete-list-of-banks-ownedcontrolled.html

    Why do so many ‘high flyer & Harvard educates’ want to become Banksters & ex politicians their highly paid advisers? None to be trusted! Seems, banking & Ponzi investments are better than owning a gold mine! Surety of last resort always remain the countries citizens- who pay the price for all folly!

    https://realcurrencies.wordpress.com/2013/04/27/end-the-fed-a-trojan-horse-destroying-the-truth-movement-from-within/

  20. Dimitris Stamiris

    ONE QUESTION ABOUT DEBT :

    EU DEBT 11 trillion
    USA DEBT 19 trillion
    CHINA DEBT 4 trillion

    TO WHO ??????? WHO HAD ALL THIS MONEY ?????

  21. Rick Wilmot

    What a crazy world we’re living in! (Reminds me of Joe Brown.) Strangely, it isn’t run by Aliens, it’s run by humans who have let the ‘greed gene’ overtake them.
    We have been warned many times about the inevitable collapse of the capitalist system, and not only by Karl Marx. It is coming, comrades, it won’t be pleasant, and if nuclear war doesn’t destroy us, future generations will look back on the current system and quite rightly assume that we were insane!

  22. Ingo Vonsundahl

    Prevent it? In my humble opinion they are responsible for the crisis by not intervening on time and in all areas but only in the ones that were the most profitable, namley banks.

  23. Tarquin Farquhar

    @Andrew Lally
    Good post!

  24. catherine benning

    I find this thread opener extraordinary. Do the people who ask this really feel they don’t know how it came about and not truly know it was something that was deliberately created by the finance industry in order to make the very few extremely rich off the backs of the ordinary working man? A bonanza they all dream of repeating over and over again.

    https://www.youtube.com/watch?v=PYmpKR98ObU

  25. Marcel

    Finance and central banks are the cause, not the solution to these crises. And you cannot speak of markets if they require constant central government and central bank intervention. Now all markets seem focused on ‘what will the central banks do’ and as I said, those really aren’t markets anymore but parasitic speculators.

    Central banks shouldn’t exist, and in particular the Euro shouldn’t exist.

required
required Your email will not be published

Leave a Reply

Your email address will not be published. Required fields are marked *

Notify me of new comments. You can also subscribe without commenting.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

By continuing to use this website, you consent to the use of cookies on your device as described in our Privacy Policy unless you have disabled them. You can change your cookie settings at any time but parts of our site will not function correctly without them.