26 Feb AJBCC Briefing: Financial Markets Outlook
Coincidentally, just a day after the recent Wall Street correction, Richard Koo, distinguished economist on Japan, gave a briefing for AJBCC members and invited guests in Melbourne. The briefing was also supported by the Victorian Government. Richard’s presentation was “The Other Half of Macroeconomics and the Fate of Globalization”. Since the global financial crisis, countries around the world have resorted to quantitative easing (QE), injecting huge amounts of money into the financial system by purchasing government and corporate debt. Whilst the purpose of this policy has been to prevent an economic recession, the excessive global liquidity has also caused other effects such as abnormally low or even negative interest rates and other distortions. Ten years on from the global financial crisis, some economies are embarking on the road to financial normalisation, with the first step being the winding back of quantitative easing.
Richard provided extensive information on the impact of QE and the challenges of reversing this policy for financial systems and the real economy. Policy option scenarios for QE easing and their likely outcomes were analysed in this slide from Richard’s extensive analysis.