If you are placing your trust in markets on the ability of central banks and governments to invisibly/independently coordinate these powerful twin levels of fiscal and monetary policy – well that’s a big ask. Can the global economy really recover without fiscal and monetary policies being played harmoniously together? Can the global economy be redirected to address all the multiple challenges like climate change, income and social inequality, and the rest unless monetary and fiscal policy are used effectively by grown ups to lever economies?
I’m asking a rhetorical question – you know it’s happening, but you don’t know how effectively. That depends on the quality of government, and the quality of central bankers. Worries me. It should probably worry you.
Policy uncertainty is a key risk for markets. The big concerns come from the various factions of the market who perceive multiple potential policy mistakes – like runaway debt to pay for fiscal stimulus driven by “god-damn socialist” spending and tax programmes, or the debasement of currency though overly easy monetary stimulus. Much of that noise is politically driven – but if often rooted in common sense.
