The need to develop welfare policies

Central banks in OECD countries are going to maintain a very expansionary monetary policy. The monetary expansion that started in 2008 and then 2013, and which has been amplified in 2020, will continue, resulting in a rapid rise in financial and real estate asset prices. At the same time, unemployment may remain high for a long time, since many employees will have to change business sector, and their skills are not necessarily adapted to the needs of the sectors that are hiring. The contrast between the difficulties faced by many employees (and also by many self-employed) and the rapid wealth accumulation by asset owners caused by the monetary policies will force governments to respond. If they do not want to tax wealth accumulation, they will have to implement welfare policies to boost the income of the poorest, those most affected by the crisis, young people, etc. And this brings us back to monetary policy: the need for these generous welfare policies will lead to persistently large fiscal deficits, and large fiscal deficits will encourage central banks to maintain public debt monetisation policies .