However, this year central banks will turn from net buyers of into net sellers of securities. The consequences of this turn of the tide in monetary policy – the implementation of which has already begun in the US, with the euro area set to follow suit soon – could be quite dramatic, as the monetary stimulant applied in an attempt to prevent a relapse into crisis conditions in the post-Lehman era had numerous side effects.
For one thing, the medicine enticed the patient to indulge in a da capo of the global debt accumulation orgy. Mario Draghi’s “whatever it takes” policy was supposed to buy time for Southern European countries to implement structural reforms and reduce their indebtedness – that was the theory, anyway. In practice extremely low interest rates were an irresistible incentive to pile up even greater mountains of debt.
