Developed economies of the world continues to face challenges in their expansion of GDP due to high government and household debt, while the bases of economic policy often has nothing to prevent future economic crises.
Christian rose several Central banks in developed countries have tightened its policy interest rates, taking measures to reduce balances and curb bond-buying, which indicates the improved prospects for economic growth will return to normal inflation growth rate and GDP.
However, despite the positive inflationary processes in the US, the Eurozone, the UK, Russia and even Japan, the global threat of strangulation of deflationary stagnation in major economies persisted.
This is due to still-sluggish consumer demand, high levels of household debt, slow growth of domestic investment in non-financial sector and still-tight fiscal policy in these countries.
Against this backdrop, several Central banks have been testing a new unconventional monetary policy — such as price-level targeting and nominal GDP (“NGDP”) targeting to ward off fears of future economic crises and to prolong their traditional political structures despite all the ineffective inflation.
“We must be vigilant to make sure that we are not overstimulating the economy and the creation of payment and price is growing faster than what we want in the long term or financial stability concern,” – said the President of the Federal reserve Bank of Boston President Eric Rosengren said in an interview on Friday.
It’s like the increase in consumer prices remain well below the 2% target of the Central Bank in many advanced economies, including in the United States — despite expectations that core inflation will hit its 2% target this year.
This happens against the background of high risks of disruptions in world trade, while many countries overly exposed to the international exchange of goods and services.
Such failures can affect and worsen the quality of life in developed countries, making supply-side Economics, and development of domestic basic production potential of weathering the storm.
“The increasingly popular narrative that sees the benefits of globalization and trade accrue to only a fortunate few also gaining momentum,” the international monetary Fund (IMF), the study said. “Politicians should solve the problems for trade affected workers, including by providing effective support for training, professional development and professional and geographical mobility to mitigate the disadvantages of further trade integration on the agenda of the trade to revive.”
State economic policy, stressing the importance of demand, the crisis has led to economic growth during the last three decades. The combination of tight fiscal policy and loose monetary policy were high taxes on domestic enterprises and private persons in combination with a printing-press-managed growth of the money supply.
This has forced most developed economies are deeply in debt. As of December 2017, the debt-to-GDP of Japan fell by 253%, Italy was 131.8 percent, it was 105.4 percent for the U.S., 97 percent for France and 89.60% for Canada. In December 2016, the debt relative to the GDP of the entire Eurozone was 88.90%.
Inflation economists, including the adherents of Neo-Keynesian Economics, argue that in the case of economic crisis, banks will sell their non-performing loans (npl), which led to lower collateral values. Such assets are falling in price, say, on the open market will start buying as soon as the price is low enough.
However, as shown by the collapse of junk bonds in the end of 2015 — known as the crisis of the third Avenue — only a few market participants are willing to buy toxic assets, regardless of low price. This suggests that there is little chance of the General economic crisis in the future will end as soon as the market bottomed out, how individual and business debt load is too high.
Boston Rosengren suggested a more hawkish approach to monetary policy is unable to prevent through economic collapse occurring in the financial sector, facilitating the economy’s transition to stronger production and savings based on the basis.
“If you end up where the unemployment rate is very low and passionate markets, which should be compensated in some point, and cause a recession, then I feel vindicated,” said Rosengren.
Sourse: sputniknews.com
