Since the financial crisis of 2008 hit, the main goal of central banks around the world has been to boost lending to businesses and consumers. Their logic: once lending increases, economic growth can get on track. To meet their targets, central banks have cut interest rates rigorously and printed trillions of new units of their own currencies. But sadly, their plan hasn’t worked out. In an ideal situation, the lowering of interest rates and the printing of money by central banks would have increased the appetite of businesses to borrow, eventually leading to economic growth. By now, shouldn’t the central banks in the global economy realize their plans have failed? It’s not just one country that is facing this problem; anywhere I look, I see similar situations. For us here at home, the Federal Reserve has announced three rounds of quantitative easing, but business and consumer lending has not increased. Small business lending in September actually decreased to its lowest level in 14 months. (Source: Reuters, November 1, 2012.) On the economic growth front, there is no growth! The central banks of China and Japan are seeing similar trends in their economies. The demand for loans in the Chinese economy plunged unexpectedly in October. The loans in the local currency were down 14% compared to the previous year. Banks only lent 505 billion yuan in October—economists were predicting 590 billion yuan. (Source: Bloomberg, November 12, 2012.) The Chinese central bank, just like the Federal Reserve, has taken the traditional approaches to try to boost lending, but they haven’t worked. The central bank has cut interest rates twice so far in 2012 and has changed reserve ratios three times since November 2011 to May of this year—but economic growth in the Chinese economy is still questionable. Similarly, loan demand in the Japanese economy is so miserable that it is dragging the country back into recession. Gross domestic product (GDP) in the Japanese economy contracted 3.5% in the third quarter (on an annualized basis) compared to the previous quarter. (Source: The Japan Times , November 12, 2012.) From 1997 to 2011, bank loans in the Japanese economy have fallen 13.5%. (Source : Financial Times , October 25, 2012.) The central bank of Japan’s actions of slashing interest rates and printing paper money has clearly not worked. I wonder how long it will take central banks to realize that their traditional monetary stimulus actions do not work. For economic growth, you want consumers to feel confident and spend. You want to see their wages increase. Right now, none of that is happening. Central banks are simply failing at their plans to stimulate their economies. America is a far cry ... Read More