The end of August is, across much of the northern hemisphere, the time for what the French call la rentrée – the return to work and resumption of normal routine that comes with summer’s end. It is typically a period that alloys melancholy with renewal and gusto for what lies ahead.
Not this year. For policymakers, August failed to bring about a return to anything like normalcy in the global economy or world politics, much less to generate a sense of renewal. On the contrary, most Project Syndicate commentators see a policy landscape littered with old ideas that don’t work, and even older ideas known to cause significant harm.
By the time central bankers from around the world convened last week at their annual gathering in Jackson Hole, Wyoming, it was clear that the hopes of just a few months ago of a return to monetary-policy normalcy was premature. Confronted with new shocks such as Brexit, and with much of the world economy, including China, in the doldrums, policymakers have been unable to avoid what might be called the Corleone effect. Indeed, to “consider the actions taken by the world’s major central banks in the past month,” says Harvard’s Carmen Reinhart, “is to invite an essential question: when – and where – will all this monetary easing end?”
Adair Turner, a former head of Britain’s Financial Services Authority and current Chairman of the Institute for New Economic Thinking, explains why central bankers cannot break out of the cycle of low interest rates and quantitative easing that began with the financial crisis of 2008. “Eight years after the 2008 crisis,” says Turner, “governments and central banks – despite a plethora of policies and approaches – have failed to stimulate enough demand to produce sustained and strong growth.” That is glaringly obvious in Japan and the eurozone, while “[e]ven the US recovery seems tepid.”