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Global economy slipping into Great Depression-like problems of the 1930s: Reserve Bank of India (RBI) Governor Raghuram Rajan

26 June 2015: The global economy is “slowly slipping” into Great Depression-like problems of the 1930s, Reserve Bank of India (RBI) Governor Raghuram Rajan has cautioned, asking central banks from across the world to define the “rules of the game” to find a solution.

Rajan, among the few to have predicted the 2008 financial crisis, said the problem was a “broader” one and for the entire world, not just for industrial countries or emerging markets. The former International Monetary Fund (IMF) chief economist, who had earlier warned against competitive monetary policy easing by central banks globally, said the situation was different in India on this front, adding RBI was more focused on reducing lending rates to spur investment.

“We need rules of the game in order to effect a better solution. I think it is time to start debating what the global rules of the game should be on what is allowed in terms of central bank action,” he said at a London Business School event here. The RBI governor was addressing a conference organised by AQR Asset Management Institute on ‘The Central Banker Perspective’.

“I am not going to venture a guess as to how we establish new rules of the game. It has to be international discussion, international consensus built over time, after much research and action,” he said.

“But I do worry that we are slowly slipping into the kind of problems that we had in the 30s in attempts to activate growth. And, I think it’s a problem for the world. It’s not just a problem for industrial countries or emerging markets. Now, it’s a broader game.”

The Great Depression refers to a period of severe global economic downturn in the 1930s, which had affected almost all countries. It began in 1929 and continued till the late 1930s, the longest and most widespread period of global economic depression.

Ref:
http://www.business-standard.com/article/pti-stories/world-economy-may-be-slipping-into-1930s-depression-problems-115062600134_1.html

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