In order to countervail the COVID-19 effects the solution found by the governments was to increase debt. Which, in my perspective as a shot-term solution can/should be considered as a way out.
Nevertheless, the 2007 Financial Crisis had as a solution the transfer of private debt to the public side, through the intervention from the central banks. Being the growth artificially sustained by low interest rates, liquidity infusions and fiscal deficits. But was never achieved a level close and/or equal to the WW2 levels.
Even so is always important that the general public understands that there are no free lunches, although as of the present time there is some level of consensus between the economists that it is the proper solution, for the short-term.
For the long run, we cannot forget the Japanese economy (with a debt that exceeds the 200% of their GDP) that has unsustainable trend with growth that is sub-par. And it is possible to be generated a vicious cycle of debt raising, demand deteriorating and growth plunging. While the world is using German and China savings.
(from: Getty Images/istockphoto in maketwatch)
In sum, as per Edith Siermann words: “The long-term worry is – who is going to pay for this?”
Warning:
Trading on CFDs involves a high level of risk, including full loss of your trading funds. Before proceeding to trade, you must understand all risks involved and acknowledge your trading limits, bearing in mind the level of awareness in the financial markets, trading experience, economic capabilities and other aspects.
Disclaimer:
Any views or opinions presented in this article are solely those of the author and do not necessarily represent those of the Company, unless otherwise specifically stated. The Company may provide the general commentary which is not intended as an investment advice and must not be construed as such. Seek advice from a separate financial advisor. The Company assumes no liability for errors, inaccuracies or omissions, inaccuracies or incompleteness of information, texts, graphics, links or other items contained within these materials. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer.