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Sources of Financial Instability: Challenges for Monetary and Fiscal Policy | Claudio Borio

Hidden Forces

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The Black Hole Problem of Secular Stagflation - What's Driving the Slow Growth?

Central banks may have kept interstrates below the natural rate for years, increasing financial instability during a period where everything seemed more or less perfect. The deleveraging of three decades of credit fueld economic expansion has increasingly become the main drivers of the business cycle. Central banks could well be stuck in a debd trap where they can only raise rates so far before they tip the economy back into deflation. This is what i mean when i talk about managing the leveraging.

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