Beyond the lockdown: Monetary policy and financial stability in the transition

William White gave a webinar on 9 June 2020 for the Global Risk Institute. He began by explaining how the global economy developed a number of “dangerous preconditions” prior to the onset of the covid 19 pandemic. In particular, global debt ratios had swelled to unprecedented levels under the influence of extremely accomodative monetary conditions.  The fiscal and monetary response to the pandemic, in the advanced market economies, will further increase debt ratios with implications for both financial stability and inflation. Mr White noted that, unfortunately,  these macroeconomic challenges will be accompanied by other challenges as well. It is clear that current trends with respect to wealth  distribution and environmental damage are not sustainable. While solutions can be proposed for all of these challenges, they will be costly and there will be political resistance. People must be convinced that solutions that are “unpalatable” are preferable to outcomes that are “disastrous”. The need for debt restructuring needs particular attention.