{"id":12764,"date":"2019-06-26T11:27:40","date_gmt":"2019-06-26T09:27:40","guid":{"rendered":"https:\/\/proacomunicacion.es\/?p=12764"},"modified":"2019-06-26T11:27:40","modified_gmt":"2019-06-26T09:27:40","slug":"the-increase-of-debt-and-public-spending-and-the-excess-of-liquidity-slowing-down-growth-of-global-economies","status":"publish","type":"post","link":"https:\/\/proacomunicacion.es\/en\/the-increase-of-debt-and-public-spending-and-the-excess-of-liquidity-slowing-down-growth-of-global-economies\/","title":{"rendered":"The Increase of Debt and Public Spending and the Excess of Liquidity, Slowing Down Growth of Global Economies"},"content":{"rendered":"

Daniel Lacalle, economic adviser to the People's Party (PP), recently spoke at a forum on the keys to investing, organised by El Espa\u00f1ol, where he presented his vision on the current and future macroeconomic outlook of global economies.<\/p>\n

The current environment is characterized by the lackluster pace of economic growth, as a result of what Lacalle calls the \"financial repression\" that is substituting investment for debt and public spending. This situation leads to the \"Japanization\" of the economy, that is, recurring low growth and inflation with historically low interest rates<\/strong>, which creates a dynamic from which it is difficult to escape. A situation that caused, for example, the fall of the Nikkei index from around 40,000 points to 13,000 in just a few years.<\/p>\n

Debt Saturation<\/strong><\/em><\/p>\n

According to Lacalle, this happens despite the fact that recession indicators have eased<\/strong>. This is because the current growth relies exclusively on the policies of central banks and governments, which focus their attention solely on increasing public spending and borrowing.\u00a0debt saturation does not generate growth<\/strong><\/p>\n

In his opinion, this doesn't address the substance of the matter, which is the fact that investment decisions and industrial production have fallen. Therefore,.<\/p>\n

The figures prove this to be true. At present, the global money supply has reached its record level of 74 billion dollars. But this does not translate into growth. On the contrary, it is an excess of liquidity that causes low and unequal growth, since it doesn't come from the investment of capital but from the recycling of capital. It is a non-efficient growth model.<\/p>\n

\"Financial repression (continued expansionary monetary policies), despite the fact that it holds back debacles in the business cycle, perpetuates imbalances and increases debt. The strategy of injecting liquidity continuously triggers the value of the ultra-cyclical assets<\/strong> (more linked to the cycle), but once these injections expire, their collapse is inevitable<\/strong>. Therefore, it is not an effective strategy according to Lacalle.<\/p>\n

Why such lackluster growth?<\/strong><\/p>\n

Lacalle explains that the current low level of growth is due to three factors:<\/p>\n