I can't help but draw the comparison between a heroin addict and today's economies.
The world's economies have become as dependent on monetary stimulus (central banks printing money and driving interest rates to near zero) as a junkie is on heroin.
The initial use gives the high and provides the escape, but after a while it's needed just to maintain the ability to function and then continued use deteriorates any productivity that once existed until an overdose eventually kills the addict.
So what's the solution? Is there a place for monetary policy and in what doses? And if so, how do we wean the patient off the drug and back to economic health?
Just as opioids in various forms are used to dull the pain until the patient can recover from illness and regain strength and health, monetary policy is just that to economies. It can be used effectively in various doses for short periods of time, but if it isn't used in conjunction with good fiscal policy, the economy in question never recovers.
Responsible fiscal policy (governments' tax and spending policies) is the only long-term solution to recovering worldwide economic health. Unfortunately the necessary fiscal policies of most countries have been sorely lacking over the past couple decades.
Without proper fiscal policy being enacted by governments, their respective economies will never regain enough strength to wean themselves off their pain-killing drug. Many feel economies have relied on monetary stimulation for so long now that it is already too late and the patients are doomed to overdose.
That may be the case, but I haven't lost hope. My only fear is that people in power usually don't react until there is a crisis, and unfortunately the next crisis may cause the overdose we have to avoid.
We need leaders who can start to reverse the welfare mentality and policies too many countries have adopted before they crumble under their own weight. We need to use monetary policy to support governments while they reduce taxes and increase spending on desperately needed infrastructure or repairs to existing infrastructure, creating massive amounts of jobs. And hope we don't overdose before these fiscal policies kick in the economic growth needed to regain worldwide economic health.
We need to support new technologies, especially in the medical field to mitigate or eliminate the looming health crises we face as our populations age. We need to crack down on all types of corruption in government, institutions and corporations in an effort to eliminate crony capitalism, nepotism and reduce the influence of power brokers and lobbyists of all sorts.
Leaders worldwide have to start acting as statesmen, altruistically working for the common good rather than selfishly enriching themselves and garnering votes for the next election.
As I write this I can't help thinking of John Lennon's song, "Imagine," only in the sense that all of this relies on the good judgment, wisdom and selflessness of our leaders in power in all the world's institutions.
Hopefully they realize that it is in their own self interest, as well as the interest of people everywhere to address these problems before it is too late.