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Having analysed, reviewed and commented on financial markets over the past year, I believe a slight touch of philosophy to market movements and economic behaviour could help economists and policymakers think outside-the-box.
The past year has seen numerous attempts by global economies to boost economic growth, numerous negotiations to stabilise the energy sector and setbacks in economic policies that have spilt over to affect nations worldwide.
Why isn’t the global economy growing?
For one, a possible cause why economic growth isn’t achieving its desired targets may well be due to the historical actions being taken by central banks in the belief they will trigger repeated reactions and market movements of preceding economic cycles .
Certain enhanced monetary policy measures taken, such as quantitative easing rolled out post the Lehman crisis in 2008, have proved supportive to economies, so much so that lower interest rates do in fact have a correlation factor vis a vis boosting consumer spending via lower borrowing costs. Investor reasoning and rationale is constantly evolving, however, and one cannot assume expectations to remain stagnant over time when implementing repeated policies.
To quote Heraclitus: “One can never step twice in the same river”. If inflation targets after numerous rounds of monetary easing are not being met, maybe what is needed is a different approach by pursuing new policy measures never taken before.
The limitations to that statement can be countered by a quote by John Locke “No man’s knowledge here can go beyond his experience”. Although repeated policy measures may not have had the same desired effects, the lack of knowledge and experience in enforcing new policy measures may be the current limitations in doing so.
We are living in a world where technological progress and globalisation continue to alter the norms of society. If change is what is needed then maybe adaptation to a new market environment may be what is required. After all to quote John Locke yet again: “The mind is furnished with ideas by experience alone”. Adapting to new economic surroundings in the form of a laissez-faire system may well provide the experience needed to move forward.
If nature is self-regulating in the long term, why shouldn’t economies follow the same reasoning?
The problem, in my opinion, unfortunately stems from political bias and agendas. Taking the U.S presidential saga, how Donald Trump has made it so far in this campaign is surely giving philosophers some new study material to analyse. Political motives almost always interfere in the true requirements of an economy and hinder a self-regulating economy.
It is well known that political issues are a drag to economic performance. When policy measures are implemented, they often follow a lengthy decision making process. An economy’s situation may well have changed by the time of implementation. Lagging and certain leading data indicators alone are insufficient tools to depict the true economic picture.
A worldwide change in political thought processes could alter the way economic issues are handled but for a final quote by Jean-Jacques Rousseau “Man is born free, but is everywhere in chains”, meaning that man’s intentions are naturally good but become tarnished by the pernicious influence of human society and institutions.
I have enjoyed being Homer for one morning. Getting back to reality, U.S upcoming elections, Brexit uncertainties and an oil production agreement will continue to set the tone of market volatility in the weeks to come.
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