The permanent negative supply shocks from accelerated de-globalization and renewed protectionism will make stagflation all but inevitable
While there is never a good time for a pandemic, the COVID-19 crisis has arrived at a particularly bad moment for the global economy.
The world has long been drifting into a perfect storm of financial, political, socioeconomic, and environmental risks, all of which are now growing even more acute.
As central banks try to fight deflation and head off the risk of surging interest rates (following from the massive debt build-up), monetary policies will become even more unconventional and far-reaching. In the short run, governments will need to run monetized fiscal deficits to avoid depression and deflation.
Yet, over time, the permanent negative supply shocks from accelerated de-globalization and renewed protectionism will make stagflation all but inevitable.
Nouriel Roubini Project Syndicate 28 April 2020
The world has long been drifting into a perfect storm of financial, political, socioeconomic, and environmental risks, all of which are now growing even more acute.
As central banks try to fight deflation and head off the risk of surging interest rates (following from the massive debt build-up), monetary policies will become even more unconventional and far-reaching. In the short run, governments will need to run monetized fiscal deficits to avoid depression and deflation.
Yet, over time, the permanent negative supply shocks from accelerated de-globalization and renewed protectionism will make stagflation all but inevitable.
Nouriel Roubini Project Syndicate 28 April 2020
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