THE CONTINUOUS DECLINE in the global economy is a result of the
inflation in the 70’s and the debt crisis in the early 90’s, says Urban Bäckström.
- We expect an increased inflation pressure from the food and raw material industries and alarmingly high debt levels in the private sector in the US - but also in other countries. Credits have grown in an unacceptable way and neither governments nor central banks have pulled the breaks on time, he says.
URBAN BÄCKSTRÖM believes that prices will drop on real estate and other assets that have experienced heavy price increases lately. As a result of developments in the global economy, outstanding debts will be written off and household savings will increase.
REGARDING SWEDEN’S economic policy, Urban Bäckström stresses four important areas:
- Even though inflation is low, the monetary policy has to be aimed at relaxing heavy credit expansion or we risk higher interest rates in the future. The job market has to become more flexible with less and more basic regulation as well as lower taxes to facilitate for Swedish entrepreneurs in a tough international climate. The Swedish government and parliament need a distinct legal framework to deal with banks in difficulties. The reason behind today’s problems in the global economy is the fast credit expansion. This will have to be managed by economic policies.
TO ACHIEVE THIS, we need close collaboration between the Swedish Financial Supervisory Authority and the Central bank and Urban Bäckström envisions a merger of these two entities.
- The Central bank is the highest authority to deal with serious liquidity problems and it needs to be clear about how to resist financial excesses in other ways than the monetary policy.
Emelie Ring