Bubbles in a "free market" are bound to burst due to the lack of effective supervision. Policies coping with the burst of the dot-com bubble in 2000 led to a financial bubble, and policies coping with the burst of the financial bubble in 2008 resulted in a sovereign debt bubble. Surprisingly, the debt bubble burst promptly, and Europe became the first victim.
In fact, Japan and the United States have higher debt levels. The debt bubble first burst in Europe because the European Union is just a relatively loose coalition of countries. It has a unified currency, but does not have a unified fiscal system, not to mention its considerable infighting and internal disagreements.
The United States and some other Western countries have no choice but to use government credit to save the private financial system from collapsing.
However, developed countries, which adopted a series of emergency measures to solve the global financial crisis, face systemic problems in financial self-discipline. Their lack of financial self-discipline has harmed themselves and other countries. Debt over-expansion can lead to growing macroeconomic and default risks.
After the global financial crisis, an unprecedentedly powerful central bank has launched quantitative easing, without considering the serious long-term negative effects of this non-conventional monetary policy.
Furthermore, the devaluation of Western currencies has enhanced the competiveness of Western exporters, and reduced the debt burden of Western countries. It was a bitter pill for emerging market countries to swallow because it led to the passive appreciation of their currencies, sharp reductions in the value of their debt holdings, and imported inflation.
The changes of developed and developing countries in their roles of creditors and debtors over the past decade are just a reflection of the eastward shift of the world's economic center of gravity. Overall, the expansion of developed countries' sovereign debts has affected their own economic development as well as the interests of developing countries, and increased the risks facing the world economy.
The government debts of certain Western countries have far exceeded the warning line. Domestically speaking, they should take decisive and effective measures to increase fiscal revenue and reduce expenditure in order to prevent further debt expansion. Internationally speaking, they should adopt a responsible attitude, and promise solemnly to never default on sovereign debts or disguise debt default through currency devaluation. Quantitative easing is undoubtedly a beggar-my-neighbor policy, and should be used with caution.
Read the Chinese version: 西方国家当自律
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