Question
Because of your excellent training, you are asked to advise Jerome Powell, Chairman of the Federal Reserve System. Powell is worried about the growth of
Because of your excellent training, you are asked to advise Jerome Powell, Chairman of the Federal Reserve System. Powell is worried about the growth of government debt in the USA. He and the European Central Bank both understand that if debt continues to grow, eventually global financial markets as a whole will be affected. In particular, they worry that private investment will be `crowded out. Powell is receiving two types of advice, from Politicians and Bankers. The Politicians say it is best to intervene in markets immediately, cut interest rates, and let investors know they can borrow cheaplythis will boost private investment. The Bankers assert that it is best to let the US and global financial markets equilibrate slowly on their own, since after all the main reason for expanded debt is a public health issue, and if there is any mispricing, smart traders will quickly pick up the deals and eliminate mispricing. How would you advise Chairman Powell?
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