The BIG question behind IMF's gloomy outlook

Quantitative Easing: Saviour of the Economy and the Financial System, or Wrecker of Society?

  • The world economy is slowing down, due in part to an unholy alliance between a late stage economic cycle (overdue), the normalisation of interest rates (overdue), and trade wars and geo-political and social tensions.
  • Growth in China, Europe and emerging economies is subdued; outlook for the US is not pretty.
  • Expansionary, unconventional, monetary policy of Quantitative Easing was successful in fighting the financial crisis of 2008/2009 and saving the economy and the financial system, however the micro economic impact of QE, particularly its effect on income/wealth inequality, was generally ignored.
  • Increased inequalities have fed unrest among broad groups, and lead to fierce social protests in different countries (e.g. recent “gilets jaunes” actions in France).
  • Populist political movements in Europe and the US are thriving in this new world of social tensions.
  • Governments need to re-assess their social economic policy approach and not rely too much on broad based macro/monetary policies.
  • “Bolt” political action including re-building social cohesion are needed. Macron’s national debate initiative demands support and should be copied. One might consider reviving of the old Dutch “Polder model”. 

For the complete article by Bart Le Blanc, please see the attachment.

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