Overly loose and long-term stimulus policies may worsen inequality -Part 1

Si Gyeongmin

Oct 27, 2021

During the “Great Moderation” of the global economy from the 1990s to the beginning of the 21st century, economic theorists believed that mankind had tamed the large cyclical fluctuations of the economy. “The core problem of preventing depression has actually been solved." The optimism is beyond words; policymakers are also quite confident in their ability to control the economy, thinking that under the influence of policy control, it seems that there is no need to worry about the recurrence of a severe economic recession like the "Great Depression." However, the 2008 financial crisis caused by the subprime mortgage crisis led to a severe recession in the global economy, which made people abandon their blind self-confidence. The major economic cyclical fluctuations have not gone far, and there seems to be a trend that makes people unbearable. The 2008 recession caused the fire of the financial crisis to spread to the real economy, devastating the real economy. The COVID-19 epidemic since last year has been a sudden shock. The quarantine, production, and work stoppages directly hit the real economy, and the degree of an economic recession is even greater than the recession caused by the 2008 financial crisis. At present, the development trend of the epidemic is still unclear, and its impact on the economy is still difficult to accurately estimate.

Of course, economic recession, regardless of the reason, will seriously erode people's welfare. Policymakers will not sit idly by the economic recession, but will use the policy tools they can use to support the economy and return the economy to its normal track.

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