World Economy

Financial Policies Threaten Global Economy

Financial Policies Threaten Global EconomyFinancial Policies Threaten Global Economy

The global economic crisis has left the economies of developed countries with huge challenges. Most of the governments resorted to set quantitative facilitation programs (assets’ purchase) as an easy measure to pump liquidity in the markets. Also, the sovereign debts increased across countries following both the jump in the revenues of assets and bonds, and the expansion of loans to attract new liquidity.

These developments steered more dangers that threaten the global financial stability, along with regression of growth perspectives in developed and emerged economies, which have led to a liquidity crisis that attacked a number of markets, accompanied with a drop of the asset’s value, the Egyptian economic researcher, Salma Hussein, told Asharq Al-Awsat.

The global economy has reached a stage of deceleration and recession in some countries due to the accumulation of the global financial crisis’ indexes, in addition to new developments such as drop in oil prices and raw materials, which has led to an unwanted decline in deflation rates in some countries like the United States and the eurozone countries.

Moreover, the world witnessed a jump in poverty rate along with these financial consequences, and a shrink in the middle class, while the fortunes of wealthy people have increased with the support of current financial and monetary policy, which urges a reconsideration of financial policy.

Hussein said that the economic theory collapsed facing the crisis that erupted late 2007.

The International Monetary Fund recently stated that it is ready to reconsider its financial approaches. A senior economist at the IMF Maurice Obstfeld said the chock caused by the international crisis led the academic society to implement a wide review of the macroeconomic policy and the impact of their decision on the world countries.

Yet, Hussein said, the acknowledgement of international institutions like IMF about the committed mistakes didn’t lead to alternative policies.

In April, the IMF issued a report on global financial stability, showing that the drop in prices of oil and raw materials led to an increased level of dangers in the emerging economies.

Hussein called for cooperation to put an end to this crisis, saying the solution can be found regionally and not solely, and that the international community was unable to face this crisis in the 21st century.