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The Post-Subprime World

In: China After the Subprime Crisis

Author

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  • Chi Lo

Abstract

On a global basis, the post-subprime crisis adjustment will likely last for a much longer time than many would expect. The double whammy of deficient demand and supply of credit, on the back of massive deleveraging by the private sector, will hold back world economic growth for a long time, suppressing goods price inflation and producing periods of asset price deflation. The biggest policy challenge for the global authorities is to find the right moment to withdraw the massive policy stimuli they injected to fight the crisis, so as to avoid reigniting inflation and crowding out private investment. There is also a rising risk of fiscal problems getting out of hand in the post-subprime world. From a secular perspective, the world economy may have entered a new economic paradigm featuring absolute abundance, excess savings and oversupply of goods.

Suggested Citation

  • Chi Lo, 2010. "The Post-Subprime World," Palgrave Macmillan Books, in: China After the Subprime Crisis, chapter 11, pages 172-183, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-29896-5_12
    DOI: 10.1057/9780230298965_12
    as

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