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Foreign Policy Analysis
Understanding the impact of monetary policy actions

Understanding the impact of monetary policy actions


Greg Davis: You know, when you think about
the response that we’ve seen already from the central banks around the globe, it’s been
pretty significant. If you look at the U.S. Fed, they’ve thrown pretty much everything
at it, including the kitchen sink. Joe Davis: Yeah. Greg: I’d love you get your perspective
of what that means and how that’s going to play out. What do you think that’s going to
do to financial conditions and things of that nature. Joe: Well, I think that is positive, right?
And I think that’s what’s a stark difference from, I think 2008 and 2009 Greg. he financial
crisis where policymakers not just in the United States, but other countries, I think,
took some time, with all the respect, to find their footing. Now the nature of this shock
has been so significant that I think it both underscores the severity of the situation,
but also the policy makers are responding that they are not immune to those needs or
issues. So, I think we will continue to see monetary policy efforts. What I’ve seen to
date has not surprised me. In fact, it’s something you and I talked about for some
time, so that is positive to provide liquidity to the markets and then additional fiscal
policy measures. I think the one thing that governments around the world are starting
to appreciate is that you do whatever it takes at times. When you’re facing a tremendous
shortfall in demand, much of which many businesses, quite frankly, didn’t ask for, right? It’s
been, it’s been necessitated. So I think that’s been positive to date. That does not mean
we will not have a recession. A recession in that sense is highly likely, but it means
that the length of the recession and the amount that we fall as a global economy that can
be blunted, in part because of the rapidity of the response.

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