The contemporary features of the US and euro-zone economies

In the wake of the COVID crisis and with the war in Ukraine, the US and euro-zone economies are characterised by the following features: High inflation, due to the very sharp rise in the prices of energy and other commodities (and in the United States the rise in profit margins); A low degree of wage-price indexation, which is a very different situation from the oil shocks of the 1970s-80s. This means that the cost of higher commodity prices is borne by households, not companies; A loss of growth due to the fall in real wages and supply problems and, in the United States, rapid fiscal deficit reduction; In the euro zone, huge additional public spending needs and persistently high fiscal deficits; In the euro zone, the threat of supply problems for energy and various other commodities; Central banks faced with a stagflationary process (less growth, more inflation), where the additional inflation is due solely to commodity prices. This is likely to lead to a more expansionary monetary policy than expected; Support for demand and equity markets provided by negative real interest rates and, in Europe, fiscal stimulus.