The global economy remains dangerously vulnerable to negative shocks, write Blackstone’s Tom Hill and Ian Morris in Foreign Affairs
. Inflation has persistently stayed below target while debt levels keep rising. Central banks are out of traditional ammunition and quantitative easing efficiency, while political constraints mean an effective fiscal plan may be beyond reach. In other words, a troubled global economy is travelling without shock absorbers. What was once a contained, slightly negative interest rate problem has now infected most of the Western world. Contagion to emerging markets at some point is inevitable.
Bold action by central banks will be needed when the next downturn inevitably arrives. We propose nine ways forward, including “helicopter money”, higher inflation targets, debt-cancellation, deeper negative interest rates and a novel “deflation insurance” scheme that just might help the global economy avoid another collapse.
Click here to read the full article, “Can Central Banks Goose Growth?”