January Economic Update: Turbulent twenties
With political populism showing little sign of abating the risk is that the 2020s will be even more turbulent than the last decade
The 2020s have started with a bang. The assassination of Iran’s military commander Qasem Soleimani by US forces serves as a reminder of the unpredictability of geopolitics. Climate change and technological disruption add to the volatile global mix which points to the ‘20s being a turbulent decade. Over the past 10 years, the creativity of policymakers on monetary policy has salved the lingering scars from the Global Financial Crisis. But rising income inequality has fuelled support for populist politicians offering alternatives to the neo-liberal prescriptions on fiscal policy, trade and international cooperation. Moreover, as Hyman Minsky warned, stability can fuel instability as investors take on more risk. The challenges of the turbulent twenties will have to be dealt with in a period of already high debt levels and an environment where low interest rates mean central banks have less ammunition to fight a downturn.
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