I dread the first lawn mow of the spring. The engine is out of practise and residual corrosion has changed the delicate balance of chemistry required for ignition.
This is where the global economy is at. Central banks have flooded the engines with fuel, hoping to fire up growth and
cut unemployment.
First they cut interest rates to zero, or nearly zero. They printed money to buy government bonds, squirting money into the banking system to encourage lending. But still the engine hasn't fired.
Economists describe it as the zero-bound problem, where the closer interest rates get to zero the less risk borrowers want to take on. Money gets hoarded in central bank deposits, failing to be pushed into the real economy.
Some are worried there is so much petrol that when the engine does fire up, the global economy will burst into flames in a surge of inflation or hyperinflation. Certainly much of the petrol of printed money has spilled out of the United States, Japan, Britain, China and Europe, and is surging into smaller economies such as New Zealand and Australia, which have open borders for investment flows. This is pushing up exchange rates and creating asset bubbles in these smaller, open economies.
