The TINA rule of boom and bust.

Everyone, writing on the global economy, agrees that growth has slowed down, but there is great debate about how to get out of the chains. The US is the richest country in the world, with a GDP of nearly $18 trillion but here too growth was 1.2% in the second quarter of this year. The US economy grew 7.6% from 1949-53, probably because of the enormous stimulus provided by the post-war reconstruction of Europe. After the stagflation caused by the oil price shock of 1973 the economy bounced back to grow by 4.3% from 1975-80. It grew 4.3% from 1982-90 but from 1991 growth rate has fallen steadily. It was 3.6% from 1991-2001, 2.8% from 2001-07, 2.1% from 2009-16 and now just 1.2%. According to an analysis by McKinsey and Global Institute 81% of the population in the US suffered a stagnant or fall in income in the last decade, compared to 97% in Italy, 70% in Britain and 63% in France. Strangely, companies are not investing in new machinery because employing people is cheaper. Sounds like India, doesn't it? Why is recovery taking so long after the crash of 2008? Apparently, because this recession was caused by high debt. When that happens households and businesses use any extra cash to pay off existing debt rather than on new expenditure, reducing both demand and supply. Politicians are loathe to take definitive action in case things go wrong, in which case they will be blamed and lose elections. So the responsibility has fallen wholly on central banks who have resorted to ZIRP, or zero interest rate and NIRP, or negative interest rate, in an effort to discourage savings and increase spending. With no return from their savings people save even more so they had an opposite effect so what about RIRP, or restrictive interest rate policy. To force banks to lend several central banks resorted to buying bonds, know as quantitative easing. With borrowing almost free and so much liquidity in the system it should be leading to rising prices as people buy on credit. But inflation rate in the US in the year to July was 0.8%, much lower than 2%, favored by the Federal Reserve. Now the Swiss National Bank has disclosed that it bought shares of 1,500 mid to large sized companies and 4,400 small companies in advanced economies  and in 800 companies in emerging markets. The SNB owns $1.5 billion worth of Apple and $1 billion worth of Microsoft shares. Central banks should not be in the business of supporting share markets, in a capitalist system. It seems that they are captives of TINA, or There Is No Alternative, first propounded by Margaret Thatcher. In the process they are building enormous asset price bubbles which will burst, to produce another recession. There really is no alternative to boom and bust.