Saturday, June 27, 2015

World economy may be slipping into 1930s Great Depression problems: RBI's Raghuram Rajan

When Raghuram Rajan warned about a looming financial market crisis a decade ago, former US Treasury Secretary Lawrence Summers said he was being 'Luddite'. In the event, Rajan was right. Now the Reserve Bank of India governor is sounding the alarm again — the very efforts of central banks in the developed world to avoid another Great Depression by keeping interest rates at zero may lead to precisely that outcome.

But this time around, there seem to be few dissenting voices. "I do worry that we are slowly slipping into the kind of problems that we had in the thirties in attempts to activate growth," Rajan told an audience at the London Business School on Thursday. "And, I think it's a problem for the world. It's not just a problem for the industrial countries or emerging markets, now it's a broader game." 

The RBI Governor, although soaked in the free-market principles of the Chicago School, has been advocating against the unconventional monetary policies .. 



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