The ongoing European sovereign debt crisis has led to renewed debate over what central banks can and should do to ameliorate the global economic slowdown. This policy response is complicated by the fact that interest rates in many countries – at least for low-risk securities – are already very low (or even negative) (see : "When Interest Rates Turn Upside Down"). At the same time, the push to tighten bank capital regulation has raised concerns that banks are being pushed to tighten lending standards which is effectively limiting the pass through of low rates into the real economy. Combined with the slow recovery from 2008 and the sovereign debt crisis, this is sparking intense debate about the direction of central banks (and fiscal authorities) policies. Should fiscal agents engage in balance sheet chicanery with banks to stimulate lending (see the attached article "Money. Where's the Money?"). Or should central banks move to increase target inflation levels (see "How Long for Low Rates?"). Alternatively, is the push for low short terms rates the wrong direction entirely (see "Double-Edged Sword of Fed's Interest Rate Policy"). Or is it time for unconventional monetary policy to push rates even lower?
