On November 16, The Market, a Swiss financial paper, published an interview with William White conducted by the editor, Mark Dittli. White pointed out the existence of a vicious circle that has been repeating for decades. A financial crisis elicits a necessary central bank response that eventually leads to easier monetary conditions. This encourages even more debt accumulation (and leverage) that leads to another and even more serious financial crisis and so on. This process is not sustainable. In the last part of the article, White refers to a set of commonly held beliefs that are simply not true.
“The idea that price stability is sufficient for economic stability? Wrong. That easy money always stimulates demand? Wrong. That the economy is self-adjusting, back to a full employment equilibrium? Wrong. That financial markets are efficient and bad things can’t happen? Wrong. That wealth will trickle down to all levels of society? Wrong. These are big beliefs. And false beliefs are dangerous”.