John Mauldin writes in the following article ” Japanification world ahead”
https://www.mauldineconomics.com/frontlinethoughts/japanified-world-ahead
Let me give you the Cliffs Notes version of how I think the next decade will play out, more or less, kinda sorta.
We already see the major developed economies beginning to slow and likely enter a global recession before the end of the year. That will drag the US into a recession soon after, unless the Federal Reserve quickly loosens policy enough to prolong the current growth cycle.
Other central banks will respond with lower rates and ever-larger rounds of quantitative easing. Let’s look again at a chart (courtesy of my friend Jim Bianco) that I showed three weeks ago, showing roughly $20 trillion of cumulative central bank balance sheets as of today. If I had told you back in 2006 this would happen by 2019 you would have first questioned my sanity, and then said “no way.” And even if it did happen, you would expect the economic world would be coming to an end. Well, it happened and the world is still here.
Before 2008, no one expected zero rates in the US, negative rates for $11 trillion worth of government bonds globally, negative rates out of the ECB and the Swiss National Bank, etc. Things like TARP, QE, and ZIRP were nowhere on the radar just months before they happened. Numerous times, markets closed on Friday only to open in a whole new world on Monday.
In the next crisis, central banks and governments, in an effort to be seen to be doing something, will again resort to heretofore unprecedented balance sheet expansions. And it will have less effect than they want. Those reserves will simply pile up on the balance sheets of commercial banks which will put them right back into reserves at their respective central banks.