THE central bankers who saved the world economy are now being told they risk hurting it. Even as the IMF cuts its global growth outlook, a flood of stimulus is running into criticism at the World Economic Forum's annual meeting in Davos.
Among the concerns: so-called quantitative easing is fanning complacency among governments and households, fuelling the risk of a race to devalue currencies and leading to asset bubbles.
"Central banks can buy time, but they cannot fix issues long-term," former Bundesbank president Axel Weber, now chairman of UBS, said in the Swiss ski resort. "There's a perception that they are the only game in town."
The warnings come as US stocks hit the highest since late 2007, London house prices jump, and junk bond yields fell below 6pc for the first time.
The economic effects from budget cuts can't be offset by rising exports because the world economy has slowed, Mr Stiglitz said. "What they've been focusing on is austerity, which makes every one of the other problems worse," he added.
History shows that in nations with the best economic growth, government spending "has played an important role" by supporting new technologies that led to the creation of new industries, Mr Stiglitz noted.