It said nations that have tried to boost their economies by cutting base rates to rock bottom could find themselves in a downward spiral, as cheap interest costs encourage even more borrowing.
The influential global banking watchdog does not single out individual countries for censure but its words clearly apply to
He added that there are signs of 'dangerous' over-confidence in financial markets that have convinced themselves rates will stay low for a very long time. The 'euphoria' in financial markets is detached from the reality of weak investment in the real economy and political tensions around the world.
Officials in the
The BIS – the only major organisation to warn of the financial crisis ahead of time – wants governments and policymakers to start reducing national debts and rebalancing their economies instead of relying on cheap money to prop up growth.
Its report said: 'Countries could at some point find themselves in a debt trap: seeking to stimulate the economy through low interest rates encourages even more debt, ultimately adding to the problem it is meant to solve.'
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