The economic system requires long-term balance between what people earn and what they spend. The loss of this balance has led to a massive debt supercycle that threatens the global economy. Breaking the cycle is one of the most pressing challenges of the 21st century, writes Atif Mian in Finance & Development magazine. https://lnkd.in/eYT9sUcH
People need the tools for development and wellbeing, i.e., education, access to healthcare and jobs with a living wage and proper housing. Extremes and imbalances and inappropriate policies and legal frameworks do not allow for international political economic development. A lopsided economic development hurts all. The political economy of economic development should be re-addressed to tackle old and new problems and skewed developments.
Capital allocation to unproductive activities is indeed dangerous and calls for balanced world governance
Productivity yes, simple ... Decades of poor political class ... Please decent hands on ... Thank you for posting
It's crucial to consider these factors in shaping policies and strategies for sustainable economic growth. Thank you for delving into this intriguing aspect of the economy!
Hitoshi Mio
7mo
Thank you, Stefan, for sharing this. The article vividly captures one aspect of the global economy's essential challenges.
Macroeconomics | Economic Policy | Data Sciences
7moThanks for ringing the alarms, but it will be more helpful if IMF promotes some of the more egalitarian approaches necessary to reduce the inequality induced credit booms. Though the essay covers the multifaceted implications of credit supercycle it highlights only one crucial facet of the credit boom—the balance sheet channel of credit expansion. Ironically, while it points out the risks of sustained increase in credit to non-tradable sectors, which are typically less conducive to productivity growth, while advocating for the promotion of such sectors, like construction. Furthermore, while the risks associated with the credit supercycle are convincingly outlined, it is important to consider another noteworthy consequence: the potential deceleration in productivity growth. This slowdown in productivity growth aligns seamlessly with the observed trends in real interest rates and the overarching credit supercycle. Overall, the essay offers a highly informed perspective on the multifaceted implications of the credit supercycle, highlighting the complex interplay between credit expansion, sectoral dynamics, and inequality. The policy should focus on eliminating factors feeding into inequality.