15 - The Growing Importance of Monetary Policy

Summary

This chapter covres: monetary policy acquires more importance; interest rates generally fall; markets for goods and money become global, facilitating borrowing; global markets are considered more efficient in the absence of disruptions, bottlenecks, and nationalistic policies; the faster growth of some large but poorer countries leads to a better global income distribution; public spending generally resists major attempts at reduction; tax levels stop rising; the good period ends suddenly in 2008 with the financial crisis and the Great Recession; this puts an end to market fundamentalism; the pandemic of 2020 and the war in Ukraine conclude the period of reduced government role; public debts reach record levels and inflation returns, creating major dilemmas for central banks on how to react; and interest rates start going up after a long period of low rates and relaxed monetary policy.