By Andrew Sheng and Michael Pomerleano
The national authorities and the international community should be commended for the speed of action taken to stop the spread of the financial crisis. To protect the financial system from the deflation in asset bubbles, the public sector has essentially guaranteed all deposits, rescued systemically important institutions, made large liquidity injections and brought interest rates to zero or near zero under a zero interest rate policy. Almost all systemically important central banks entered into ZIRP under emergency conditions at the same time.
But the polices adopted to combat the crisis are creating their own problems. In the medium term, the treatment may be as expensive as the crisis. Read more