The late English chanteuse Amy Winehouse sang, “They tried to make me go to rehab, but I said ‘No, no, no.’” Perhaps 2013 should be known as the year of Winehouse economics, with the singers being the world’s most important central banks, led by the Federal Reserve.
CAMBRIDGE – Perhaps we should call 2013 the year of Winehouse economics. As the late English chanteuse Amy Winehouse sang: “They tried to make me go to rehab, but I said ‘No, no, no.’” In 2013, the singers were the world’s most important central banks, led by the Federal Reserve.
In the summer, both the Fed and the People’s Bank of China signaled their intention to normalize monetary policy. Fed Chairman Ben Bernanke talked openly of “tapering” the Fed’s policy of open-ended bond purchases, also known as quantitative easing (QE). PBOC Governor Zhou Xiaochuan actually did try to rein in his country’s runaway credit growth. But when markets in both countries reacted more violently than expected – with bond yields soaring in the United States and inter-bank lending rates spiking in China – the monetary authorities backed off.
It is a problem many a pop singer has encountered: After years of stimulus, rehab is just not that easy.
We hope you're enjoying Project Syndicate.
To continue reading, subscribe now.
Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.
Already have an account or want to create one to read two commentaries for free? Log in