A major problem with highly expansionary monetary policies: Misallocation of savings

A little discussed and yet key problem is that highly expansionary monetary policies can significantly curb long-term growth by leading to inefficient allocation of savings. This inefficient allocation of savings is due in particular to the fact that: Risk-free interest rates have fallen, but not the required return on capital: this has led to an increase in public debt and a slowdown in productive capital; Risk premia have been squeezed and no longer provide investors with information on the level of borrower risk; Central bank s hold more and more assets and do not know how to allocate capital efficiently; When interest rates are lower than growth rates, it is no longer possible to calculate the fundamental value of assets; financial markets then no longer provide information on the value of companies and their projects, in this bubble configuration.