Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

India’s Rajan Sees Risk of New Crisis on Loose Monetary Policies

Aug. 7 (Bloomberg) -- The world is at risk of another financial crisis as monetary stimulus in developed economies encourages investors to take risks and boost asset prices, Reserve Bank of India Governor Raghuram Rajan said in two interviews.

“We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost,” Rajan told the Central Banking Journal. Global monetary authorities must coordinate more closely and create a safety net to protect developing countries and avoid a “merry-go-round” of perpetual crisis, he told U.K. newspaper The Times.

Rajan has been a vocal critic of developed nations’ monetary policies and their impact on the rest of the world. The former International Monetary Fund chief economist said the world hasn’t learned its lesson from the credit crisis and criticised the use of quantitative easing and other “extreme monetary actions,” according to The Times.

Investors are counting on “easy money” being available for the foreseeable future and thinking they can sell before everyone else does, he was quoted as saying by the Central Banking Journal.

“They put the trades on even though they know what will happen as everyone attempts to exit positions at the same time,” he said. “There will be major market volatility if that occurs.”

Rajan said the problems arising “are not so much from credit growth, which is relatively tepid in the industrial markets and has been much stronger in emerging markets, but from asset prices due to financial risk-taking,” the Journal reported.

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net Matthew Brockett, Tracy Withers

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.