In a world where the new normal is yet to be defined, with the Government spendings knowing no bounds and the stock market being poles apart from the real economic situation in many countries, changing roles of retail banks, the Central bank and the Government are inevitable. During the depression of 1930's the biggest challenge facing the economies was to prevent further inflation. Later duDuring the crisis of the 1970s and 1980s preventing stagnation was the biggest challenge and now during the post pandemic era the challenge lies within the hands of the Governments to keep the business cycle running.
A politicised take over of the economy is inevitable. To keep these takeovers from happening most countries invented the Central bank system which used a simple tool of interest rates to control inflation, spending and savings. Somehow most countries are nearing to lower interest rates system which will only increase inflation. The rising high prices along with lowered interest rates from the banks are sure to polarise the economy even further.
Lower interest rates for borrowing helps Governments push infrastructure projects, improving social security and improve research to prove a point about how effective their Governance is. This spending even though on low interest rates only increases the tax liability of the tax payers not only over a few years but over decades.
states intervention with the Reserve bank to introduce a stimulus package which only increases the burdens of taxes on the people in the long run. States intervention should be limited to the extent of law making, the execution however must be done by Financial institutions only. This kind of shift which happens only once in a generation. The state has to have a much broader outlook and have a deeper reach to create opportunities for individuals and markets to thrive.
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