Central bankers all over the world are asking themselves the same question: when is the time to start the Big Exit? It surely cannot be now, or can it? I suspect the right answer is: perhaps not now, but earlier than you think.

Exiting will be a multi-stage process. The technical details will differ from one central bank to another. For the European Central Bank, I would expect the programme to begin with a withdrawal of long-term refinance operations, to be followed by a tightening of the conduct of ordinary liquidity policies. And before the ECB starts raising its main short-term interest rate, it will first raise the deposit rate – at which banks can deposit surplus cash.

There is plenty else to do before raising rates. So it will take time. Given the bubbles that are already building up in several markets, this may well be too late. Ronald McKinnon*, professor of international economics at Stanford University, recently made a convincing case for a moderate increase in US interest rates. He argued that this would help the money markets to return to normal, put a floor underneath the dollar, and help China stabilise its economy. His arguments appear sensible to me. His advice will not be heeded.