Structural Reforms Required to Safeguard Democratic Future

William White and Sunil Sharma coauthored an article that was posted by OMFIF on 21 April, 2022. They argue that we could be one serious economic crisis away from significant political turmoil that might threaten our democratic traditions. After decades of slow growth, stagnant real wages, and the many costs of covid, a restless public is increasingly inclined to see political structures as “rigged” and “unfair”.  We must cease relying on macroeconomic stimulus (especially monetary policy) to paper over structural problems, while inadvertently making them worse. Instead,  policymakers should address those structural issues more directly: not least, rising inequality, market concentration, environmental degradation and the need for debt restructuring.

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Liquidity Tidal Wave

William White, along with others, answered a question posed by the editors of The International Economy for their Winter 2022 edition: “To what extent is today’s massive global ocean of liquidity breaking all the rules in US financial markets?” White suggests (page 10) that nominal bond rates have stayed low, in part, because the Fed has convinced the bond markets that real rates are “naturally” low, and that higher inflation is only transitory. Should either of these arguments be contested, and White notes there are good grounds to believe they might be, then nominal rates might rise sharply. In this case, ” the effects on an overleveraged global economy would not be pretty”.

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What about the risk of a bursting asset bubble?

Along with twenty other economists, William White answered the question posed by The International Economy. White advised that the negative effects of ultra-easy monetary policy extend well beyond overpriced assets and that another economic downturn could be triggered by a variety of sources. A new focus on facilitating “orderly” debt restructuring would be unpalatable but still preferable to a “disorderly” and potentially disastrous alternative.

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Did Europe Just Experience its “Hamiltonian Moment”?

William White, along with a number of others, answered this question in the Summer Edition of The International Economy. He concluded that the agreement of member countries of the EU to allow a significant expansion in community issued debt was a remarkable and welcome development. However, it fell far short of being a “Hamiltonian Moment”. Not least, there was no assumption of state debts by some higher political order. Nor was their agreement on a dedicated source of funds to ensure the future servicing of centrally issued debt.

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Is the world still at risk of the “Japan disease”?

This question was posed by the editors of The International Economy to a symposium of over thirty analysts, including William White. White responded that the world will likely languish in “an extended low growth funk” unless the problem of ever growing public and private sector debt is adequately addressed. The “headwinds” of debt were already exerting an undesirable influence on the global economy prior to the pandemic, and the policy response (however necessary, short term)  has made this underlying problem worse. White suggests that, absent any credible alternative policies, cooperative agreements between debtors and creditors to restructure debts might be the least costly and least risky solution.



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How long should lockdown measures to fight covid-19 continue?

This article was published on 22 April 2020 in “The Market” a Swiss digital business paper associated with NZZ. It argues that governments need to clarify the criteria they will use to determine when to relax the current “lockdown”, which is helping to save lives (by taking the pressure off hospitals), but also has enormous economic (lost jobs)  and social costs. “Flattening the curve” by social distancing should be complemented as soon as possible by all the government expenditures (and legislation) needed to allow the hospitals to cope. Then, social distancing, with all its costs, can be relaxed. Much improved antigen and antibody testing will also support earlier relaxation.

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The recession and the pandemic: cause or trigger?

William White wrote an Intelligence Memo for the C D Howe Institute on 26 March 2020. He notes that the pandemic has certainly caused a recession, hopefully one followed by a “V” shape recovery, but it might also trigger a deeper and more prolonged downturn. In recent decades, global monetary policy has focused too much on short term effects and too little on the longer term consequences – like the continued build up of debt. Macroeconomic policies designed to support the economy in the face of the pandemic should balance off “urgency” with longer run “effectiveness”.

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“Take a thought for the morrow” (Matthew 6:34)

This article was published as an OMFIF Commentary on 23 March. It expresses concern that the recession sparked by the pandemic might turn into something deeper and more long lasting.  While recognizing the associated need for policy to lean urgently against the current slowdown, to support a “V” shaped recovery, White notes that some ways of doing so are more effective than others. Policy choices should also “take a thought for the morrow” so as to avoid unintended longer term consequences.


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Are fears of a global “currency war” justified?

This article was recently published in German and English by “The Market” , a leading online Swiss financial journal. It argues that, in some respects, we have actually been engaged in a kind of currency war for many years. Countries are not actively trying to depreciate against the dollar, but they are actively trying to prevent their currencies from appreciating. Should the Trump administration now respond, be trying unilaterally to lower the value of the dollar, this could result in a decline in faith in the value of all fiat currencies. In short, another battle in the currency war would be a very bad idea.


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