Western policy makers have been watching the Fed in order to gain some insights about the normalization of financial conditions in the near future /Raghuram G. Rajan, Project Syndicate Jan.31, 2022 /.

The Federal Reserve will either prolong the party or will tighten its monetary policy significantly to control inflation. So there might be either the rerun of the “Fed normalization policies in 1982” or the Fed answers to the “irrational exuberance” of 1996 by doing nothing.

In my view, however, it is not “to normalize or not” is the key to the future. For both, fiscal and monetary policies the vital question is how to use targeted spending and central bank’s programs in order to strengthen inclusive economic growth, creating more jobs and fasten the transition to a sustainable path. Neither “normal” nor the present “more than unorthodox” fiscal and monetary policies cannot do the job because in this unusually turbulent decade everything is getting more and more non-linear. In this new Quantum-world linear, predictable, “normal or not” universal policies are not working anymore.

We need targeted watering in the Negev desert called the global economy to survive our decade.

Governor Matolcsy, MNB, the Central Bank of Hungary

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