Central banks have been credited with averting a global depression twice over the past 15 years: Once after the 2008 financial crisis, and again at the height of the coronavirus pandemic.
But the tactics they deployed to restore confidence and keep money flowing from banks to the economy amounted to a high-stakes experiment — one that may be impossible to unwind without destabilizing the financial system.
Central banks purchased tens of trillions of dollars worth of government bonds and other assets in a bid to bring down longer-term borrowing costs and stimulate their economies. This measure, known as “quantitative easing,” or QE, created a flood of cheap cash and gave policymakers newfound sway over markets. Investors called it the era of “easy money.”