Financiers polled by Bloomberg warned the world economy about too many bubbles that could subsequently “collapse”, leading to a worsening of the current crisis.
Experts blame the central banks of different countries for “blowing bubbles”, primarily the US Federal Reserve System (FRS) and the European Central Bank (ECB). Most of them have taken a course towards easing monetary policy in recent months – through quantitative easing programs that provide for the purchase of government and corporate bonds.
Such actions have two goals: to reduce profitability in the borrowing market and to inject additional liquidity into the banking system so that its participants can lend to the economy. For example, the Fed last year announced the start of a virtually unlimited easing program (in addition to other assistance programs totaling $ 2.3 trillion), and the ECB launched similar measures for 1.85 trillion euros.
As a result, the yield on government and corporate bonds fell to historic lows, in some cases dropping below zero, which made borrowing record cheap and at the same time encouraged investors to invest in other types of assets: stocks, currencies (including emerging markets), precious metals , real estate, cryptocurrencies.
In each of these markets, there has been a sharp increase in value, which is also fraught with the formation of new “bubbles”. Some asset managers and investment company employees report that their clients do not understand the nature of what is happening and often prefer to sell existing assets, which reduces their value. In the long term, this situation could lead to “bursting of bubbles”, which will entail losses for investors, both private and institutional, increasing inequality and deepening the recession.
At the same time, according to analysts, the current global crisis differs from the previous ones in that the financial authorities do not announce the end date for supporting the economies through money emission and soft credit policy. This avoids additional nervousness in the markets. However, they call an increase in government spending as a more optimal solution: with the help of them, existing (and not freshly issued) money is attracted, which avoids an increase in inflation.