The unsustainable has run its course
Unlike national central banks, the Bank for International Settlements doesn’t have to worry too much about the effect of its statements on business and consumer confidence or on the possibility of political flak. Hence, it has usually tended to give a less rosy view of the economic outlook than other official and quasi-official institutions. The latest assessment is particularly gloomy .
The full annual report has the cheery title “The unsustainable has run its course and policymakers face the difficult task of damage control” (Overview here).
The money quote:
Perhaps the principal conclusion to be drawn from today’s policy challenges is that it would have been better to avoid the build-up of credit excesses in the first place. In future, this could be done through the establishment of a new macrofinancial stability framework, which would call for both monetary and macroprudential policies to “lean against the wind” of the credit cycle
It’s hard to disagree with this, but equally hard to imagine such a framework (reminiscent of the “new global financial architecture” proposed in the late 90s) being introduced without the stimulus of a truly dire financial crisis.