Cheap money hurting global growth prospects

With China slashing interest rates for the sixth time in a year last Friday, it seems that major economies around the globe are converging on monetary easing.

However, cheap money, as an expedient measure to fight a financial crisis, has largely proved inadequate to address long-term challenges. An ultra-loose monetary policy did not save the Japanese economy from its lost decades nor did counterintuitive negative interest rates galvanize the eurozone into solid growth.

Worse, if global policymakers cannot promptly reach an agreement on how to exit from cheap money in an orderly way, the uncertainties caused by the on-and-off debate about when the United States will hike its near-zero interest rate may just be the tip of the iceberg.