Above is an interesting interview aired last night on ABC’s The Business with Ann Pettifor, who is a renowned international finance expert and Director of Policy Research for Macroeconomics, discussing how Governments needing to do more to deliver financial sustainability.
According to Pettifor, nothing is being done to fix the structural imbalances in the global financial system, in particular the high debts that have accrued in advanced economies across all sectors – government, business and households. And while central banks can continue to pump liquidity into the financial sector via their quantitative easing programs, there aren’t enough people in the real economy looking to borrow and invest, which means the extra liquidity is flowing straight into asset values, causing dangerous bubbles.
Pettifor believes that governments should create the economic activity that is now lacking, including via infrastructure projects. In effect, we need monetary and fiscal policy to work together, rather than monetary policy working alone.
Pettifor argues that there is currently some $4 trillion of funds that have flowed from European and US central banks into emerging markets and Australia, which is going to flow straight back out as soon as interest rates are raised. And this may cause extreme volatility.
Finally, Pettifor argues that central banks were delinquent in their risk management duties leading-up to the financial crisis, and have essentially escaped accountability in its after math. As such, they are repeating past mistakes.
