The Dynamics of Modern U.S. Fiscal and Monetary Policy and the Implications for the Future…

The Dynamics of Modern U.S. Fiscal and Monetary Policy and the Implications for the Future of Financial MarketsBy Ian A Zelaya on The Capital· High levels of liquidity provided by the fiscal and monetary policy will maintain bankruptcies levels low and wages relatively stable.· Longer-term Treasuries will now finance the U.S. debt used for the coronavirus crisis.· The forecast of low levels of bankruptcies by investors is causing a divergence between stock prices and the real economy.The current coronavirus crisis uncovered the fragile state of the corporate and consumer sector due to historical levels of debt. The U.S. government and the Federal Reserve understand the risks of these levels of debt, and as a result, responded in an aggressive manner. The difference between the Great Depression and the current recession lays in the response of the government. In figure 1, we see the current flow of liquidity to avoid a severe chain effect in bankruptcies and a severe decline in the demand for products and services.The Dynamics of Modern U.S. Fiscal and Monetary Policy and the Implications for the Future… was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Author: Ian A Zelaya

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