The economic policies conducted since the onset of the COVID crisis will come at a cost

During the COVID crisis, OECD countries implemented highly expansionary fiscal policies and central banks monetised the fiscal deficits, allow ing long-term interest rates to remain very low despite these deficits. There has been talk of “magic money”, of the ability of governments to finance huge public spending without any ensuing cost. But it is important to understand that these economic policies will now come at a cost: When central banks stop buying government bonds, either fiscal policy will become more restrictive or long-term interest rates will rise; The sharp rise in real estate prices due to the highly expansionary fiscal and monetary policies is a tax on home buyers (similar to the usual inflation tax) and, moreover, leads to an inefficient use of savings; The diversion of savings into purchases of non-productive speculative assets (cryptocurrencies, commodities, etc.) will reduce potential growth.