Within countries, the problem is that government is much more polarized across the world, You have many more populist parties, nationalist parties and it’s going to be very hard to reach the agreement. That’s Necessary to launch big spinning programs and things of that nature. Then you also have disagreements across countries which means that it’s much more likely you have contentious policies tariffs that go up, currency wars and things of that nature as countries struggle to deal with the next downturn.
Ideally governments would be taking some steps right now to get ready for the next recession. The countries should be changing their central bank policy targets. What we’ve learned is that a low inflation target doesn’t give central bank’s enough room to fight recessions before interest rates fall to zero. They should also be getting their budgets ready, which means preparing to include measures that will increase spending automatically when the economy weakens in the future so that they don’t have fights in Parliament about whether or not to expand spending when the time comes. But then most important of all, we think governments need to coordinate their responses with each other that makes it much more likely that we don’t enter a scenario like we did in the 1930s When tariff barriers went up when there were currency wars and competitive devaluations and when ultimately that led to some pretty significant and nasty geopolitical tension.
