So this to me is the biggest problem when it comes to fiscal policy. During recessions, central banks reduce interest rates AND increase money supply in order to stimulate the economy. Governments HAVE to do their part by increasing spending but over the last 3 decades, government spendings have NOT matched the actions of the BOC in proportion. Spending needs to be immediate, and not some delayed project that takes 5 years to implement. Sub point to this is that government investment programs need to be counter-cyclical as much as possible (i.e. Chinese gov’ts massive spending during the last global downturn in infrastructure). And during inflationary times, governments need to reduce or restrain spending, and enact policies that remove supply constraints in essential goods like housing.
The BIGGEST issue we’ve had in the past 30-40 years has been the former - central banks having to act alone to resuscitate the economies without governments doing their part. Which has led to a successive cycle of cheap money-led boom and bust that’s brought interest rates lower and lower which has fueled the wealth divide that’s brought about the social inequities and class divide we have today.
A government willing to go into debt with public spending? Cut off corporate subsidies and allocate the increased revenue to new technology businesses to reduce the risk involved in trying something different?
So this to me is the biggest problem when it comes to fiscal policy. During recessions, central banks reduce interest rates AND increase money supply in order to stimulate the economy. Governments HAVE to do their part by increasing spending but over the last 3 decades, government spendings have NOT matched the actions of the BOC in proportion. Spending needs to be immediate, and not some delayed project that takes 5 years to implement. Sub point to this is that government investment programs need to be counter-cyclical as much as possible (i.e. Chinese gov’ts massive spending during the last global downturn in infrastructure). And during inflationary times, governments need to reduce or restrain spending, and enact policies that remove supply constraints in essential goods like housing.
The BIGGEST issue we’ve had in the past 30-40 years has been the former - central banks having to act alone to resuscitate the economies without governments doing their part. Which has led to a successive cycle of cheap money-led boom and bust that’s brought interest rates lower and lower which has fueled the wealth divide that’s brought about the social inequities and class divide we have today.
Unfortunately, I don’t see it ending soon.
@RandAlThor @kyr7x What would be the solution(s)?
A government willing to go into debt with public spending? Cut off corporate subsidies and allocate the increased revenue to new technology businesses to reduce the risk involved in trying something different?