Argentina, now undergoing a huge financial crisis, faces two choices. In the bad scenario, it will default on its debt, suffer a run on its banks and devalue its currency, causing contagion in emerging markets throughout the world. In the good scenario it will avoid default, but only by imposing an austerity plan so harsh that the economy contracts this year and next, imposing tremendous hardship on Argentina’s people.
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While carbon pricing and industrial policies may have enabled policymakers in the United States and Europe to avoid difficult political choices, we cannot rely on these tools to achieve crucial climate goals. Climate policies must move away from focusing on green taxes and subsidies and enter the age of politics.
explains why achieving climate goals requires a broader combination of sector-specific policy instruments.
The long-standing economic consensus that interest rates would remain low indefinitely, making debt cost-free, is no longer tenable. Even if inflation declines, soaring debt levels, deglobalization, and populist pressures will keep rates higher for the next decade than they were in the decade following the 2008 financial crisis.
thinks that policymakers and economists must reassess their beliefs in light of current market realities.