TookThe economies of OECD countries will, in the coming years, look more like the 1980s-1990s than the 2010s. The first feature of this “Back to the Future” is the sequence of prices and salaries. The bargaining power of employees is actually recovering for two reasons. First, high inflation will prompt them to demand a better index of wages for prices, the loss of purchasing power due to the current low index being unbearable; Then, the difficulties of recruiting companies, from 2021 onwards, have become extremely strong, with changes in the needs of companies – they must meet the very strong demand for goods – and with the rejection of difficult jobs and unusual hours. We should therefore observe a greater ability of employees to receive wage increases in the future when economic conditions are good and there is better indexing of wages to prices.
The second feature is the attitude of the central banks. Since 2012, facing permanently low inflation, they have no longer conducted restrictive monetary policies. We will see a reappearance of a countercyclical monetary policy, followed by recessionary expansion, then gradually restrictive. Of course, central banks are still reluctant today to return to this monetary practice of the past, but they have to come to terms with it and start fighting inflation again in the second half of the extension period.
So we are going to witness a reappearance of monetary cycles, in the years 1970 to 2000, before the subprime crisis: after the recession, unemployment is high, inflation and interest rates are low; Gradually unemployment decreases, inflation rises. At a certain level, the central bank decides to break inflation down to trigger a recession (this is what it did from 1980 to 1982, in 1990, 2000, and 2008). Inflation is falling, and monetary policy may again be expansionary, with the economy gaining momentum. These monetary cycles linked to inflationary cycles disappeared in the 2010s.
What are the consequences of this return in monetary cycles? The first is that the barriers to medium-term debt stabilization are reappearing. In the late 2010s, as interest rates were not rising, it was not really necessary to deliver to states or companies, and the public deficit remained high in addition to many countries (the United States). United States, United Kingdom, France…). We then spoke of the “principle of overheating”: it was a question of continuing to support demand while the economy was close to full employment, forcing companies to be more productive and letting them hire less-skilled workers. to encourage. ,
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