Davies: Clear Balance Sheets or Risk the Consequences

The video discusses the challenges of perverse incentives in society, particularly how they affect central bank control and economic stability. It highlights the issues with targeting low inflation rates, leading to negative interest rates and economic inertia. The lack of deleveraging post-crisis is examined, emphasizing the need to clear debt to avoid prolonged low interest rates. The limitations of central banks in managing economic downturns are discussed, along with potential solutions like mergers and fiscal policy changes, including possible tax increases.

What are the implications of holding excess cash in an economy?

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How does reaching the lower band of interest rates affect the central bank's control over the economy?

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In what ways can governments address the issue of high debt levels?

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What are the consequences of a prolonged period of negative or zero interest rates?

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What role do mergers and acquisitions play in the context of economic recovery?

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