Mainstream thinking supports the use of this unconventional monetary easing on the grounds that weak growth post-crisis is mainly the result of a lack of aggregate demand and thus the solution is to boost demand generally by reducing the cost of borrowing and inducing investors to shift from low-yielding government bonds to riskier assets in search of yields. 12. While there was general agreement on the need and efficacy of action taken by central banks during the crisis period to stabilise the markets, the same cannot be said for using the extremely accommodative monetary easing by the advanced economies to support economic growth and job creation. Looking beyond mainstream thinking, there are some sound analyses by renowned economists, such as Bill White of the OECD and Dr Rajan, the former IMF Chief Economist and newly appointed Governor of the Reserve Bank of India, that suggest these unconventional monetary policies are now in “uncharted waters” and may create unintended consequences and risks to the global financial system. At this point, I will mention three key costs or risks of these unconventional monetary policies. (a) First, these policies punish the savers and pensioners: The suppression of interest rates at close to zero is helpful to debtors, but I should hasten to add that only those debtors who can refinance themselves at the lower rates can benefit.
On a number of occasions in recent years I have expressed the view that although there were many factors leading to the Global Financial Crisis and the European Debt Crisis, the root cause of our present predicament is the excessive leverage and indebtedness built up over the past two to three decades in the household, corporate and government sectors in the advanced economies. During this period, the indebtedness of many industrial economies, such as the US, the UK, France and Germany increased steadily from 160% or 1.6 times of GDP to over 320% of GDP. Japan, of course, ranked the highest in this “league table” with over 450% of GDP. This is alarming not just because the stock of debt was rising, but the speed of the increase outpaced the economic or income growth of these economies by 100% over this period. What is even more depressing is that the aggregate public and  BIS central bankers’ speeches  1  private sector indebtedness ratios actually increased even further after the financial crisis in most advanced economies except for Germany. 6. The increases were mostly due to a sharp pick up in public debt in most advanced economies after the Global Financial Crisis, as substantial amounts of public funds were deployed by the crisis-hit countries to salvage their financial systems, while the real economies were suffering from falling fiscal revenues with slow growth and rising public spending.