Irreversibilities

The current economic equilibrium in OECD countries entails several risks of economic policy irreversibility: The irreversibility of “wage austerity”, an end to which would lead to inflation and potentially to rising interest rates and a debt crisis, after a long period of debt accumulation at very low interest rates; The irreversibility of highly expansionary monetary policies, for the same reason: the crisis that would be triggered by an increase in interest rates after a long period of low rates; The irreversibility of high public debt ratios, which can no longer be reduced by inflation (if the wage austerity is irreversible) and therefore can only be reduced by a restrictive fiscal policy, which is rejected in most countries. Th e OECD may therefore have to get used to weak wages, low interest rates and high public debt ratios.