As per the latest piece of research published by Merrill Lynch of Bank of America Corp (NYSE:BAC), the economic growth on the global level, is likely to decline in 2015, indicating the fears of economic meltdown.
Improved economic growth is an illusion
While most of the people believe that the world is becoming richer, the fact remains that the notion of reviving prosperity is a false delusion. The Bank’s latest research highlights that the economic growth on the international platform, as measured with the basic US dollar, will drop down. This will be the first time since the economically-dangerous 2009 financial crisis.
It is quite evident that the concept of improved economic growth is a fiscal illusion because it is absolutely visible that the policy makers are not making huge progress on structural reforms. These reforms are mandatory to drive the productive capacity at the global level, while also stimulating demand and employment.
Understanding QE and its effects on Economy
The new fiscal belief needs to be completely understood. However, The Financial Times explains that the latest QE (quantitative easing) should work in favour of better Dollar strength as well as restricted increase of interest rates. Also, it is believed that the global equities and high yielding debt, both of which form a part of risk assets, shall be performing better and strongly.
It is only in the time to come that one will understand about the pricing distortions that present regimes of QE create on the global front. This in turn, is most likely to impact the standard of living of people and also output, both of which will drop down considerably.
Quantitative easing is the traditional kind of a monetary policy which allows the Central Bank of a country to form new money through electronic means in order to purchase the financial assets. This kind of a policy allows increasing the spending of private sector, and thus allowing the inflation to come back to target.