Global Recession: A Money Gift Cure Possibly

Gerasimos Soldatos

MPRA Paper from University Library of Munich, Germany

Abstract: Today, the world economy is at the brink of a major recession at zero lower bound. The recession has been fomented by the underconsumption induced by (i) the increasing income inequality, which is inherent in the neoliberal policymaking followed the last third of a century, and (ii) the declining wages being brought about by the increasing globalization and hence, international competition. And, the zero lower bound has been the aftermath of continuous interest rate reductions to confront the latent recessionary trends by stimulating investment but by increasing at the same time the prices of assets, bonds, and housing inciting several kinds of “bubbles” and inhibiting investment. The policy of “quantitative easing” in the place of interest rate reductions, a surrogate only of the latter has proved to be so far, for the simple reason that the money injections involved to spur business and household demand, are channeled towards the banking system, which withholds and does not pass on the money to the public. A money gift policy in the sense of transferring money directly to the public as a permanent asset for the private sector but not liability for the public sector, activating subsequently the Pigou effect, is advocated herein to be a viable policy alternative out of the current deadlock, ceteris paribus.

Keywords: Global recession; Underconsumption; Zero lower bound; Quantitative easing; Money gift/rain (search for similar items in EconPapers)
JEL-codes: E20 E30 E40 E50 E60 (search for similar items in EconPapers)
Date: 2015-12-01
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in American Journal of Economics, Finance and Management 5.1(2015): pp. 574-578

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/66535/1/MPRA_paper_66535.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66535

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().