Japan and the United States are using asset bubbles to revive their economies. They are struggling to manage the speed of bubble expansion or contraction. This dancing on a pinhead brings big uncertainty to the global economy. When they fail, a global recession may follow.
As hot money chases the bubbles in Japan and the United States, the BRIC bubble has deflated halfway. So far no big blowup has occurred, due to continuing loose monetary policy around the world. A soft landing is possible. But, the price is a prolonged slowdown. A major crisis would have prompted them to reform and then recover quickly.
Real economic reforms will occur only when bubble economics, in whatever form it appears, is thoroughly discredited. The first sign would be the replacement of the current generation of central bankers by a new one with a different ideology.
Source: Caixin
