A decisive choice for central banks in a few years: To avert a debt crisis or huge asset price bubbles?

C entral banks in OECD countries today have opted to keep monetary policy highly expansionary in order to: Rapidly reduce unemployment; Reap the benefits of “overheating” policy; Facilitate huge fiscal deficits. But in a few years’ time, they will have to choose between: Keeping their policy in place to prevent a rise in long-term interest rates and thus prevent a major debt crisis; Or exiting this policy and normalising monetary policy in order to prevent an endless rise in asset prices (ever-larger bubbles). Whatever they decide , it will have very negative consequences: either the continued growth of bubbles or a debt crisis.