კონფერენცია

∘ Malkhaz Chikobava ∘
MONETARY-FISCAL POLICY MIX AND EXPECTED SOVEREIGN DEFAULT RISK

Summary

The article analyzes the monetary policy against the background of the viral-economic crisis. It is noted that the US Federal Reserve System is actively involved in the process of rescuing the American economy, which has launched the "printing press" of the dollar at full capacity. Additional issued dollars are mainly used to buy corporate stocks and bonds on the stock markets. There is a rapid growth in capitalization of the leading American IT corporations, and in fact - inflation of financial bubbles. COVID-19 is clearly provoking serious changes in the economies of all countries of the world, one of which is the decrease in the role of central banks in the context of the increasing role of finance ministries. It turned out that central banks are unable to completely eliminate the economic imbalances that have arisen during the current crisis. The global economy has not yet managed to overcome the crisis, despite the fact that the central banks of the leading countries have been steadily cutting key rates to make money as cheaply as possible. Several central banks have cut their key interest rate to zero, the European Central Bank has kept it at zero for several years, and the key interest rate set by the Bank of Japan is minus 0.4%. Money in the form of bank loans became really unprecedentedly cheap - almost free, but there was no real economic recovery.

In this regard, now we are witnessing the reincarnation of Keynesianism, but in a much uglier version. We fear that the Ministry of Finance will continue to treat the “patient” with the same monetary drugs, only in a different package and under different names. It seems that the ugly reincarnation of Keynesianism probably can no longer help the "patient." The fact is that the current size of the sovereign debt of the United States and other developed countries has reached astronomical proportions, which every day increases the risk of default of sovereign debts. And this clearly threatens the world with a much deeper crisis.

Keywords:COVID-19, viral-economic crisis, central banks, quantitative easing, monetary policy budget structure, sovereign debt, risk of default.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ Malkhaz Chikobava ∘ MONETARY-FISCAL POLICY MIX AND EXPECTED SOVEREIGN DEFAULT RISK Summary The article analyzes the monetary policy against the background of the viral-economic crisis. It is noted that the US Federal Reserve System is actively involved in the process of rescuing the American economy, which has launched the "printing press" of the dollar at full capacity. Additional issued dollars are mainly used to buy corporate stocks and bonds on the stock markets. There is a rapid growth in capitalization of the leading American IT corporations, and in fact - inflation of financial bubbles. COVID-19 is clearly provoking serious changes in the economies of all countries of the world, one of which is the decrease in the role of central banks in the context of the increasing role of finance ministries. It turned out that central banks are unable to completely eliminate the economic imbalances that have arisen during the current crisis. The global economy has not yet managed to overcome the crisis, despite the fact that the central banks of the leading countries have been steadily cutting key rates to make money as cheaply as possible. Several central banks have cut their key interest rate to zero, the European Central Bank has kept it at zero for several years, and the key interest rate set by the Bank of Japan is minus 0.4%. Money in the form of bank loans became really unprecedentedly cheap - almost free, but there was no real economic recovery. In this regard, now we are witnessing the reincarnation of Keynesianism, but in a much uglier version. We fear that the Ministry of Finance will continue to treat the “patient” with the same monetary drugs, only in a different package and under different names. It seems that the ugly reincarnation of Keynesianism probably can no longer help the "patient." The fact is that the current size of the sovereign debt of the United States and other developed countries has reached astronomical proportions, which every day increases the risk of default of sovereign debts. And this clearly threatens the world with a much deeper crisis. *Keyword**s:COVID-19, viral-economic crisis, central banks, quantitative easing, monetary policy budget structure, sovereign debt, risk of default.*