From the international vicious cycle… to ridiculing Air France
The general director of the International Monetary Fund Christine Lagarde recently painted a bleak picture in describing the…
The general director of the International Monetary Fund Christine Lagarde recently painted a bleak picture in describing the growth prospects of the world economy.
She predicted lower growth rates in 2015 than in 2014, while underlining the threat from the retraction in China, Brazil and other developing economies. Likewise, the recovery is anemic in Europe and doubtful in the USA.
At present the doubts over the strength and capabilities of the monetary policy is being doubted among the dominant international financial circles. In recent years monetary policy has undertaken many responsibilities, with many believing that it is running out of capabilities.
It is estimate that the expansive nature of monetary policy, as expressed with the near-zero interest rates and the constant interventions in the unreliable – due to huge debts – markets of state and corporate bonds, will no longer have a balancing effect and will require assistance from fiscal policy.
For some time now, the Fed – the federal central bank of the United States – is facing the prospect of increasing its interest rates after many semesters of constant reductions. It has not done so because it believes that the consequences will be serious, since are no powerful offsets to be found in other sections of economic policy.
Many believe that it is necessary to shift the weight to fiscal policy, as everywhere, from Europe to America, it is restrictive and does not allow any relation, while passing on the pressure to businesses all over the world, who in the name of competition will cut jobs and salaries without a second thought.
However, the shift in question, from the monetary to fiscal policy, will undoubtedly increase the deficits and thus the state debts, bringing back to the forefront the forgotten debt crisis which has been bidding its time. The debts, both state and corporate, remain high and threaten the health of banking institutions, which are being tested every so often in order to determine their strength and sufficiency of their capital.
In other words the international vicious cycle remains active and absolutely threatening. The zero interest rates cannot be endured for much longer; in conjunction with the restrictive fiscal policies they result in deflation and stagnation, which in turn require fiscal offsets. These offsets however generate deficits and gives rise to the threat of excessive debt, undermining the health of the Banks and so forth.
The events that took place on Monday at Air France, with administrative officers being ridiculed – not in the Athens of Kollas and Markakis, but in the Paris of light and culture – precisely reveal the problematic nature of the international vicious economic cycle, which starts from excessive debt.
Without control, settlement or actively managing and reducing the debts, the world will not find a balance.
Inequality, tensions, conflicts, crises and unique impasses will constantly emerge.
The global economic system desperately needs to be reset; otherwise it will drown it the vicious cycle, to which it gives birth.