The Global Economy’s Inevitable Hard Landing
The global liquidity and credit crunch that started last August has become more severe. A global economic slowdown is now inevitable, because monetary policy cannot address the core problems that underlie the current crisis.
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In recent weeks, the global liquidity and credit crunch that started last August has become more severe. This is easy to show: in the United States, the euro zone, and the United Kingdom, spreads between Libor interest rates (at which banks lend to each other) and central bank interest rates – as well as government bonds – are extremely high, and have grown since the crisis began. This signals risk aversion and mistrust of counterparties.