Highly expansionary fiscal and monetary policies: An ultimately catastrophic quick fix or an overheating policy leading to structural economic improvement?

Since the subprime crisis, OECD countries have conducted highly expansionary fiscal and monetary policies. There are two competing views of their long-term effects: A pessimistic view: these policies were a quick-fix solution to boost demand and activity with “magic money”, which will ultimately lead to a very severe crisis under the weight of overindebtedness, asset price bubbles and the search for speculative investments; An optimistic view: they constitute an “overheating policy”, with strong demand stimulus leading to virtuous developments among companies: drive to lift productivity, hiring of low-skilled workers. The facts show that while there is indeed overindebtedness and asset price bubbles, these policies have also had positive effects by overheating the economy, especially in the United States.