The US Federal Reserve’s new policies drafted to increase inflation are aimed to improve the country’s economy. These policies may, however, weaken the dollar. Macroeconomic influencers share their views on the Covid -19 impact.
Peter Morici, an economist and professor at the University of Maryland, shared an article on how the Federal Reserve’s policies to increase inflation may threaten the dollar’s dominance as a global currency.
The article noted that although the Federal Reserve has announced the policy change, the central bank’s policy making powers have diminished over the years due to the globalisation of US securities markets and dollar’s dominance in global commerce.
The Federal Reserve needs to finance federal deficits and drive inflation by printing money to ensure the dollar’s dominance as the Chinese Yuan is fast emerging as a rival to the currency.
— WashTimesOpinion (@WashTimesOpEd) September 7, 2020
Jeff Stein, a journalist, shared an article on a survey conducted by the Morning Consult on how more number of people returned to work during August. The outlook for unemployed and furloughed employees, however, remains weak as they struggle to find jobs.
With lack of skills and training, unemployed people are struggling to find jobs in new industries. Unemployment benefits for some of these employees ended in July making approximately 50% or 8.3 million of them unable to pay for basic expenses in August.
Any further decline in unemployed people’s inability to pay basic expenses is expected to impact the recovery of the US economy, the article added.
% of jobless workers unable to pay for basic expenses – food, clothing, housing, transportation
($600/week unemployment benefit expired in late July)
— Jeff Stein (@JStein_WaPo) September 7, 2020
Rupa Subramanya, an economist, shared an article on how the mishandling of India’s pandemic crisis will lead to long-term slowdown in the country’s growth. India is one of the worst performers in the G-20 group nations, according to the International Monetary Fund (IMF).
India’s economic growth was already slowing down before the pandemic and the demonetisation in 2016 further impacted low income groups. The economic stimulus package announced by the government accounted for only 1% of GDP, which is significantly lower than other emerging economies.
Further, the pandemic has delayed the implementation of much needed structural reforms for the land, labour and capital markets. These reforms may now be too late to be implemented as the country deals with the pandemic and the after effects.
Several economists say now that the mishandling of the crisis may cause a long term slowing of growth, even after the pandemic is over
India’s growth story has never seemed so endangered https://t.co/anhZQBePey
— Prosenjit Datta (@ProsaicView) September 7, 2020
Richard Tol, an economist, shared an article on the impact of the pandemic on stock market capitalisation in the long run. While the world is grappling with the health crisis created by the pandemic, the stock markets have been performing beyond expectations reaching all time highs.
The article attributes this disconnect to the increase in market power for some firms against others in addition to the low discount rates. Although the market capitalisation is at historic levels, the risk of a stock market crash is still high and may be followed by poor returns, the article adds.
Using data for 1870-2015 across 17 countries, looks like stock market values seem to move with GDP for the first 100 years, but have been unrelated to real economy of a country after 1980s https://t.co/SFM4FD5Nv1 Rise of profit share? https://t.co/AISfmTDTBS
— John Van Reenen (@johnvanreenen) September 7, 2020