WASHINGTON - We are now discovering the limits of cheap money.
For more than four years, central banks around the world - led by the Federal Reserve - have aggressively pumped money into their economies to stimulate faster revival.
These infusions are huge. From 2007 to today, the assets of major central banks nearly doubled from $10.4 trillion to $20.5 trillion, reports the Bank for International Settlements in its just-released annual report.
When these assets (bonds, mortgages and other financial instruments) are purchased, the sellers receive cash.
The outpouring of cash aims to lower interest rates, push up stock prices and real estate values, and restore confidence and stronger economic growth.
The most charitable verdict on this massive monetary experiment is that it has done modest good. In the United States, it did reduce long-term interest rates and, to some extent, bolster stocks.
Even so, the speed of the U.S. recovery (about 2 percent annually) is roughly half the average of all recoveries from 1960 to 2007.
As for the global economy, it grew 2.5 percent in 2012, down from the 3.7 percent average from 2003 to 2007, says IHS Global Insight. Few major countries are doing better now than before the financial crisis.
Cheap money hasn't been a smashing success. Still, when the Fed suggested last week that it might curb bond-buying later this year, stocks swooned.
That's one downside: Cheap money is hard to reverse gracefully.
The larger problem is that central banks are trying to do things beyond their powers.
Says Stephen Cecchetti, the chief BIS economist: "Monetary stimulus alone cannot put economies on a path to robust, self-sustaining growth, because the roots of the problem preventing such growth are not monetary."
In the annual report, he argues that low interest rates might even be counterproductive. They make it easier to finance large budget deficits and may delay needed, though unpopular, cuts.
(Created in 1930 to help settle World War I debts, the BIS now serves mainly as a forum for international financial cooperation.)
Cecchetti's preference for deficit reduction is controversial; economists disagree about the need to cut deficits.
But his main point is correct and may be understated. Cheap money can't rescue the global economy.
Indeed, though no one dare say it, there may be no plausible set of policies to neutralize all the forces retarding growth.
The most powerful of these in the United States, as I've repeatedly written, is the legacy of the financial crisis and Great Recession.
Their suddenness and magnitude sobered and frightened people in ways that sapped vitality and optimism. Households, companies, bankers, government regulators - just about everyone - became more cautious and, in economics jargon, "risk averse."