Quick Edit | Still in crisis mode1 min read . Updated: 12 Aug 2010, 11:28 PM IST
Quick Edit | Still in crisis mode
Combating a crisis is like riding a super-fast train, one that we’re anxious to get off.
The world has been on such a train for three years now, Monday marking a key anniversary. The European Central Bank sounded the alarm on 9 Aug 2007 by injecting €95 billion (Rs5.75 trillion today) into fitful credit markets.
Three years on, until last week, central banks had signalled that they might finally let us off the train. They had started tightening or withdrawing emergency measures. The earlier credit crisis had abated.
But it may have left behind another economic crisis, according to the US Federal Reserve’s actions on Tuesday.
Instead of letting its balance sheet naturally shrink to its pre-crisis size, the Fed—pessimistic about a recovery—is keeping the money flowing in the system constant, possibly setting the stage for more aggressive measures later.
Global equities are now getting anxious, truly wondering if this train is going around in circles.