Roubini Warn Quantitative Easing Will Establish A Zombie Bank

Dr Doom Nouriel Roubini re-issued sharp warnings. This time he focused on the side effects of quantitative easing or asset purchase program which was later performed by many of the world's central banks.

In a direct debate at the World Economic Forum in Davos, Roubini said that the world's central banks took a big risk running QE.

"Over time, you will produce the zombie banks, zombie companies and zombie households that would be dangerous in the long term," he said. The term 'zombie bank' was first used in Japan to describe the actual borrowers do not deserve credit, but get less fresh funds to the QE program.

Roubini asserts that QE is important to ward off the risk of a new Great Depression after the collapse of Lehman Brothers in 2008. However, he criticized the short-term benefits of QE could not match the long-term risk. He argued 9 reasons why the conventional wisdom is not to harm the economy in the long term.

But the 'prophecy' Roubini was deflected by Adam Posen, manta member of the Bank of England monetary committee. Posen is supporting the continuation of QE England when he took office.

According to Posen, opposition to QE currently only comes daro "deep spiritual belief that this policy will lead to inflation."

Roubini argues that keijakan QE will bring consequences if central banks misjudge their exit strategy. He criticized the Federal Reserve who want to buy bonds until the unemployment rate falls to 6.5%. He said they may have misjudged how much the unemployment rate is going to go down without causing inflation.

Roubini warned that the central bank will take the risk of destroying the regime of inflation targeting in the world that has been running for 20 years.

"You see the QE2, QE3, and soon you will see QE without limits: what will happen to the monetary policy regime? Many countries adopted inflation targeting, today British weigh to delete: what will be the new anchor How are we going to give the anchor on people's expectations of inflation? "

In Davos on Wednesday (23/1) and then, Roubini's forecast of economists break. Approximately 60% of the audience of policymakers and academics still support Posen. They argue that the short-term benefits of QE is comparable to the long-term risks.