{"id":17614,"date":"2016-02-10T13:28:24","date_gmt":"2016-02-10T18:28:24","guid":{"rendered":"http:\/\/olduvai.ca\/?p=17614"},"modified":"2016-02-10T13:28:24","modified_gmt":"2016-02-10T18:28:24","slug":"whats-holding-back-the-world-economy","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=17614","title":{"rendered":"What\u2019s Holding Back the World Economy?"},"content":{"rendered":"
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What\u2019s Holding Back the World Economy?<\/a><\/h3>\n<\/header>\n
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NEW YORK \u2013 Seven years after the global financial crisis erupted in 2008, the world economy continued to stumble in 2015. According to the United Nations\u2019 report\u00a0World Economic Situation and Prospects 2016<\/a><\/i>, the average growth rate in developed economies has declined by more than 54% since the crisis. An estimated 44 million people are unemployed in developed countries, about 12 million more than in 2007, while inflation has reached its lowest level since the crisis.<\/p>\n

More worryingly, advanced countries\u2019 growth rates have also become more volatile. This is surprising, because, as developed economies with fully open capital accounts, they should have benefited from the free flow of capital and international risk sharing \u2013 and thus experienced little macroeconomic volatility. Furthermore, social transfers, including unemployment benefits, should have allowed households to stabilize their consumption.<\/p>\n

But the dominant policies during the post-crisis period \u2013 fiscal retrenchment and quantitative easing (QE) by major central banks \u2013 have offered little support to stimulate household consumption, investment, and growth. On the contrary, they have tended to make matters worse.<\/p>\n

In the US, quantitative easing did not boost consumption and investment partly because most of the additional liquidity returned to central banks\u2019 coffers in the form of excess reserves. The\u00a0Financial Services Regulatory Relief Act<\/a>\u00a0of 2006, which authorized the Federal Reserve to pay interest on required and excess reserves, thus undermined the key objective of QE.<\/p>\n<\/div>\n

Indeed, with the US financial sector on the brink of collapse, the\u00a0Emergency Economic Stabilization Act<\/a>\u00a0of 2008 moved up the effective date for offering interest on reserves by three years, to October 1, 2008. As a result, excess reserves held at the Fed soared, from an average of $200 billion during 2000-2008 to $1.6 trillion during 2009-2015. Financial institutions chose to keep their money with the Fed instead of lending to the real economy, earning nearly $30 billion \u2013 completely risk-free \u2013 during the last five years.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

What\u2019s Holding Back the World Economy? NEW YORK \u2013 Seven years after the global financial crisis erupted in 2008, the world economy continued to stumble in 2015. According to the United Nations\u2019 report\u00a0World Economic Situation and Prospects 2016, the average growth rate in developed economies has declined by more than 54% since the crisis. An […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[12320,303,305,6070,12321,460,661,662,827,2773,3246],"class_list":["post-17614","post","type-post","status-publish","format-standard","hentry","category-economics","tag-emergency-economic-stabilization-act","tag-fed","tag-federal-reserve","tag-financial-sector","tag-hamid-rashid","tag-joseph-stiglitz","tag-qe","tag-quantitative-easing","tag-united-states","tag-volatility","tag-world-economy"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/17614","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17614"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/17614\/revisions"}],"predecessor-version":[{"id":17615,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/17614\/revisions\/17615"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17614"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17614"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17614"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}