ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Central Banks and Speculative Froth

It has been the pattern over the past two decades, after every major bust, for the US Federal Reserve and other central banks to cut interest rates and liquefy credit markets. Such decisions have softened the blows to the global economy but they have also created speculative bubbles. Financial institutions and speculators have thus learnt to put pressure on central banks to bail them out, most recently from the housing bust in the US. But at some point the rescue measures will not work and the result will be major global economic and geo-political problems.

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