Pandemic-induced fiscal operations and monetary accommodation have pushed nominal and real policy rates into negative terrain, while aid to offset lost jobs and income has soared into the trillions around the G-7 economies.
With Joe Biden set to be inaugurated as the 46th president of the United States on Wednesday, the American government will most likely begin adding to global fiscal accommodation. At this time, the United States has put forward fiscal aid that is roughly equal to 18% of gross domestic product compared with 20% of GDP in the U.K. and 57% in Japan.
While a vaccine is on the horizon, it may be well into 2022 before it can be distributed on a global basis. That almost certainly implies effective zero policy rates and negative policy rates in the major economies and trillions of dollars in fiscal aid to put a floor under economic activity during the first quarter of 2021. That in turn will be followed by stimulus to awaken the animal spirits that underscore global capitalism
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