Staring into the abyss

Chinese troops must stay off the streets of Hong Kong

Deploying the army would have dangerous repercussions for China and the rest of the world




IT IS SUMMER, and the heat is oppressive. Thousands of students have been protesting for weeks, demanding freedoms that the authorities are not prepared to countenance. Officials have warned them to go home, and they have paid no attention. Among the working population, going about its business, irritation combines with sympathy. Everybody is nervous about how this is going to end, but few expect an outcome as brutal as the massacre of hundreds and maybe thousands of citizens.

Today, 30 years on, nobody knows how many were killed in and around Tiananmen Square, in that bloody culmination of student protests in Beijing on June 4th 1989. The Chinese regime’s blackout of information about that darkest of days is tacit admission of how momentous an event it was. But everybody knows that Tiananmen shaped the Chinese regime’s relations with the country and the world. Even a far less bloody intervention in Hong Kong would reverberate as widely.

What began as a movement against an extradition bill, which would have let criminal suspects in Hong Kong be handed over for trial by party-controlled courts in mainland China, has evolved into the biggest challenge from dissenters since Tiananmen. Activists are renewing demands for greater democracy in the territory. Some even want Hong Kong’s independence from China. Still more striking is the sheer size and persistence of the mass of ordinary people.

A general strike called for August 5th disrupted the city’s airport and mass-transit network.

Tens of thousands of civil servants defied their bosses to stage a peaceful public protest saying that they serve the people, not the current leadership. A very large number of mainstream Hong Kongers are signalling that they have no confidence in their rulers.

As the protests have escalated, so has the rhetoric of China and the Hong Kong government. On August 5th Carrie Lam, the territory’s crippled leader, said that the territory was “on the verge of a very dangerous situation”. On August 6th an official from the Chinese government’s Hong Kong office felt the need to flesh out the implications. “We would like to make it clear to the very small group of unscrupulous and violent criminals and the dirty forces behind them: those who play with fire will perish by it.” Anybody wondering what this could mean should watch a video released by the Chinese army’s garrison in Hong Kong. It shows a soldier shouting “All consequences are at your own risk!” at rioters retreating before a phalanx of troops.

The rhetoric is designed to scare the protesters off the streets. And yet the oppressive nature of Xi Jinping’s regime, the Communist Party’s ancient terror of unrest in the provinces and its historical willingness to use force, all point to the danger of something worse. If China were to send in the army, once an unthinkable idea, the risks would be not only to the demonstrators.

Such an intervention would enrage Hong Kongers as much as the declaration of martial law in 1989 aroused the fury of Beijing’s residents. But the story would play out differently. The regime had more control over Beijing then than it does over Hong Kong now. In Beijing the party had cells in every workplace, with the power to terrorise those who had not been scared enough by the tanks. Its control over Hong Kong, where people have access to uncensored news, is much shakier. Some of the territory’s citizens would resist, directly or in a campaign of civil disobedience. The army could even end up using lethal force, even if that was not the original plan.

With or without bloodshed, an intervention would undermine business confidence in Hong Kong and with it the fortunes of the many Chinese companies that rely on its stockmarket to raise capital. Hong Kong’s robust legal system, based on British common law, still makes it immensely valuable to a country that lacks credible courts of its own. The territory may account for a much smaller share of China’s GDP than when Britain handed it back to China in 1997, but it is still hugely important to the mainland. Cross-border bank lending booked in Hong Kong, much of it to Chinese companies, has more than doubled over the past two decades, and the number of multinational firms whose regional headquarters are in Hong Kong has risen by two-thirds. The sight of the army on the city’s streets would threaten to put an end to all that, as companies up sticks to calmer Asian bases.

The intervention of the People’s Liberation Army would also change how the world sees Hong Kong. It would drive out many of the foreigners who have made Hong Kong their home, as well as Hong Kongers who, anticipating such an eventuality, have acquired emergency passports and boltholes elsewhere. And it would have a corrosive effect on China’s relations with the world.

Hong Kong has already become a factor in the cold war that is developing between China and America. China is enraged by the high-level reception given in recent weeks to leading members of Hong Kong’s pro-democracy camp during visits to Washington. Their meetings with senior officials and members of Congress have been cited by China as evidence that America is a “black hand” behind the unrest, using it to pile pressure on the party as it battles with America over trade (a conflict that escalated this week, when China let its currency weaken.

Were the Chinese army to go so far as to shed protesters’ blood, relations would deteriorate further. American politicians would clamour for more sanctions, including suspension of the act that says Hong Kong should be treated as separate from the mainland, upon which its prosperity depends. China would hit back. Sino-American relations could go back to the dark days after Tiananmen, when the two countries struggled to remain on speaking terms and business ties slumped. Only this time, China is a great deal more powerful, and the tensions would be commensurately more alarming.

None of this is inevitable. China has matured since 1989. It is more powerful, more confident and has an understanding of the role that prosperity plays in its stability—and of the role that Hong Kong plays in its prosperity. Certainly, the party remains as determined to retain power as it was 30 years ago. But Hong Kong is not Tiananmen Square, and 2019 is not 1989. Putting these protests down with the army would not reinforce China’s stability and prosperity. It would jeopardise them.

Trump’s Deficit Economy

Economists have repeatedly tried to explain to Donald Trump that trade agreements may affect which countries the US buys from and sells to, but not the magnitude of the overall deficit. But, as usual, Trump believes what he wants to believes, leaving those who can least afford it to pay the Price.

Joseph E. Stiglitz

stiglitz261_Drew AngererGetty Images_trump jerome powell


NEW YORK – In the new world wrought by US President Donald Trump, where one shock follows another, there is never time to think through fully the implications of the events with which we are bombarded. In late July, the Federal Reserve Board reversed its policy of returning interest rates to more normal levels, after a decade of ultra-low rates in the wake of the Great Recession. Then, the United States had another two mass gun killings in under 24 hours, bringing the total for the year to 255 – more than one a day. And a trade war with China, which Trump had tweeted would be “good, and easy to win,” entered a new, more dangerous phase, rattling markets and posing the threat of a new cold war.

At one level, the Fed move was of little import: a 25-basis-point change will have little consequence. The idea that the Fed could fine-tune the economy by carefully timed changes in interest rates should by now have long been discredited – even if it provides entertainment for Fed watchers and employment for financial journalists. If lowering the interest rate from 5.25% to essentially zero had little impact on the economy in 2008-09, why should we think that lowering rates by 0.25% will have any observable effect? Large corporations are still sitting on hoards of cash: it’s not a lack of liquidity that’s stopping them from investing.

Long ago, John Maynard Keynes recognized that while a sudden tightening of monetary policy, restricting the availability of credit, could slow the economy, the effects of loosening policy when the economy is weak can be minimal. Even employing new instruments such as quantitative easing can have little effect, as Europe has learned. In fact, the negative interest rates being tried by several countries may, perversely, weaken the economy as a result of unfavorable effects on bank balance sheets and thus lending.

The lower interest rates do lead to a lower exchange rate. Indeed, this may be the principal channel through which Fed policy works today. But isn’t that nothing more than “competitive devaluation,” for which the Trump administration roundly criticizes China? And that, predictably, has been followed by other countries lowering their exchange rate, implying that any benefit to the US economy through the exchange-rate effect will be short-lived. More ironic is the fact that the recent decline in China’s exchange rate came about because of the new round of American protectionism and because China stopped interfering with the exchange rate – that is, stopped supporting it.

But, at another level, the Fed action spoke volumes. The US economy was supposed to be “great.” Its 3.7% unemployment rate and first-quarter growth of 3.1% should have been the envy of the advanced countries. But scratch a little bit beneath the surface, and there was plenty to worry about. Second-quarter growth plummeted to 2.1%. Average hours worked in manufacturing in July sank to the lowest level since 2011. Real wages are only slightly above their level a decade ago, before the Great Recession. Real investment as a percentage of GDP is well below levels in the late 1990s, despite a tax cut allegedly intended to spur business spending, but which was used mainly to finance share buybacks instead.

America should be in a boom, with three enormous fiscal-stimulus measures in the past three years. The 2017 tax cut, which mainly benefited billionaires and corporations, added some $1.5-2 trillion to the ten-year deficit. An almost $300 billion increase in expenditures over two years averted a government shutdown in 2018. And at the end of July, a new agreement to avoid another shutdown added another $320 billion of spending. If it takes trillion-dollar annual deficits to keep the US economy going in good times, what will it take when things are not so Rosy?

The US economy has not been working for most Americans, whose incomes have been stagnating – or worse – for decades. These adverse trends are reflected in declining life expectancy. The Trump tax bill made matters worse by compounding the problem of decaying infrastructure, weakening the ability of the more progressive states to support education, depriving millions more people of health insurance, and, when fully implemented, leading to an increase in taxes for middle-income Americans, worsening their plight.

Redistribution from the bottom to the top – the hallmark not only of Trump’s presidency, but also of preceding Republican administrations – reduces aggregate demand, because those at the top spend a smaller fraction of their income than those below. This weakens the economy in a way that cannot be offset even by a massive giveaway to corporations and billionaires. And the enormous Trump fiscal deficits have led to huge trade deficits, far larger than under Obama, as the US has had to import capital to finance the gap between domestic savings and investment.

Trump promised to get the trade deficit down, but his profound lack of understanding of economics has led to it increasing, just as most economists predicted it would. Despite Trump’s bad economic management and his attempt to talk the dollar down, and the Fed’s lowering of interest rates, his policies have resulted in the US dollar remaining strong, thereby discouraging exports and encouraging imports. Economists have repeatedly tried to explain to him that trade agreements may affect which countries the US buys from and sells to, but not the magnitude of the overall deficit.

In this as in so many other areas, from exchange rates to gun control, Trump believes what he wants to believe, leaving those who can least afford it to pay the Price.


Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. He is the author, most recently, of People, Power, and Profits: Progressive Capitalism for an Age of Discontent (W.W. Norton and Allen Lane).


Deutsche Bank and UBS Explored European Banking Alliance

Deal talks in June never coalesced but show how far European lenders are willing to go to address a punishing banking environment

By Jenny Strasburg


UBS CEO Sergio Ermotti and Chairman Axel Weber at the company's shareholder meeting in May. Photo: arnd wiegmann/Reuters


Deutsche Bank AG DB -2.79%▲ and UBS UBS -1.41%▲ Group AG this year explored ways to combine their businesses, including talks as recently as mid-June to form an unusual alliance of investment-banking operations, according to people familiar with the discussions.

The talks between Germany and Switzerland’s biggest lenders show how far European lenders are willing to go to address a punishing banking environment. Hammered by negative interest rates and slowing economic growth, European banks are struggling to compete globally and fend off encroachments from bigger U.S. rivals on their home turf.



A deal never coalesced, as the two sides failed to sort out thorny issues, including how to structure and allocate capital to any joint operations, the people said. Deutsche Bank and UBS for years have contemplated exploring a merger, the people said. One person who has been involved in multiple deliberations said the talks have been on and off but never fully off the table.

Inside Deutsche Bank, a tie-up was seen as a way to save Germany’s biggest bank from the painful cuts now in motion, the people said. The banks discussed a full-blown merger earlier in the year, a move that would have created a European banking behemoth more able to compete with Wall Street’s most dominant players, such as JPMorgan Chase& Co. and Goldman Sachs Group Inc. Bloomberg reported in May that the two banks briefly explored a merger. The June talks haven’t been previously reported.

UBS has suffered from volatile performance in its investment bank, and shares currently trade near their lowest point since it restructured its business in 2012. Deutsche Bank’s shares trade just above their all-time low hit this month.

The mid-June discussions, held near Milan, included the finance chiefs of both banks, senior investment-banking executives and advisers, some of the people said. The executives discussed ways to swap some operations and intertwine parts of their investment banks but keep the parent companies separate, according to the people familiar with the talks.

The people said a concept behind an alliance was to play to the strengths of both lenders, as Deutsche Bank, which remains a big player in its fixed-income trading and structuring business, would get referrals from UBS, which pulled back from some of those business lines several years ago. Deutsche Bank would feed business into UBS’s more successful equities franchise, the people said. UBS was interested in some of Deutsche Bank’s deal-advisory teams in the U.S., a person briefed on the discussions said.

Such a venture was seen by some involved as a possible test case, some of the people familiar with the talks said. It might have allowed the German and Swiss banks—and regulators, governments and investors—to gauge whether a merger might make sense, without committing to a new headquarters, regulatory regime or full restructuring, the people said.

Deutsche Bank’s then-investment-banking chief Garth Ritchie was at the meeting in Italy, along with Alexander von zur Muehlen, who is Chief Executive Christian Sewing’s top internal adviser on strategy. So was UBS’s Robert Karofsky, co-president of the investment bank, people familiar with the meeting said.


Deutsche Bank CEO Christian Sewing, right, speaks with Chairman Paul Achleitner at the bank’s annual meeting in May. Photo: Alex Kraus/Bloomberg News


UBS Finance Chief Kirt Gardner attended, and Deutsche Bank’s CFO,James von Moltke, dialed in, people familiar with the talks said. Tadhg Flood, a partner with deal advisory firm Centerview Partners, was advising the German bank, the people said. He previously served inside Deutsche Bank and remains a confidant of Mr. Sewing. On the UBS side was Jonathan Wills, the people said, another Deutsche Bank alum who worked this year for consulting firm Oliver Wyman. In June, Mr. Wills joined UBS as head of investment-bank strategy.

Earlier in the year, when Deutsche Bank was in talks to merge with crosstown rival Commerzbank AG, Deutsche Bank had parallel discussions with UBS to combine their asset management arms, The Wall Street Journal and others reported in April.

UBS Chairman Axel Weber earlier this year discussed with German officials the potential merits of a UBS-Deutsche Bank deal, and UBS Chief Executive Sergio Ermottiwas also open to exploring the idea, some of the people said.



The full merger talks went on for weeks, but by May they bogged down over regulation of the investment bank and the location of a combined bank’s headquarters—Zurich, Frankfurt, a third location where neither bank is located, or some combination of the three, according to people familiar with the talks.

By June, Deutsche Bank was running out of time. While talking with UBS, the German bank was planning cuts and discussing with other banks selling off stock-trading technology and pieces of its prime-brokerage franchise, which serves hedge funds. French bank BNP Paribas eventually struck a deal for some of those businesses.

The alliance discussions with UBS were short-lived; UBS walked away after the Milan meeting, some people familiar with the negotiations said. Deep cooperation short of a merger is rare in the banking world. People involved in the talks said the two sides decided they couldn’t quickly sort out how to structure the operation or share capital between the entities. One of the people said the idea was a long shot.

On June 21, Mr. Sewing emailed business heads demanding additional details for executives preparing the “equity story” for a major restructuring, people familiar with the internal communications said.

Some inside the bank said the crunch of hurried decision-making left executives little time to finalize senior management and cost-cutting decisions. They say the impact is still felt, with confusion about what services the bank will keep and how much capital those businesses need.

On the first Sunday in July, Messrs. Sewing and von Moltke laid out a reorganization that included the departure of three management-board members, including Mr. Ritchie, and 18,000 job cuts. There will also be a major pullback from the bank’s Wall Street presence, with an exit from most of its equities business and more investment in its strongest fixed-income and advisory businesses.

Central banks have lost much of their clout

Monetary policy is no longer enough to keep the economy on track

Adair Turner


© Jonathan McHugh


As leading central bankers meet this week in Jackson Hole, Wyoming, financial markets and media anxiously await indications of future policy direction. This year’s topic is Challenges for Monetary Policy and, amid slowing global growth, the talk is of interest rate cuts and clearer forward guidance.

In September, the European Central Bank may commit to keeping rates below zero beyond 2020. Some economists think the Bank of England’s Monetary Policy Committee should make explicit interest rate forecasts, mirroring the US Federal Reserve practice.

Many hope that the Fed’s recent 0.25 per cent rate cut will be the first of many. Governor Haruhiko Kuroda of the Bank of Japan faces calls for action to counter stubbornly low inflation. More quantitative easing is possible.

Given the uncertainty, this year in particular the precise words spoken at Jackson Hole will be scrutinised with great care. But, in reality, what central banks can do alone is no longer very important.

It has been clear since the 2008 global financial crisis that when short and long-term interest rates are already very low, further cuts make little difference to real economic activity. If the BoE now cuts its rate from 0.75 per cent to 0.5 per cent the impact on consumption will be trivial.

Because big German companies can already borrow 10-year money at less than 0.5 per cent, using quantitative easing to reduce that to, say, 0.4 per cent will make almost no difference to their investment plans. Pushing policy rates too far into negative territory could instead reduce growth by limiting bank profitability and lending.

Central banks’ attempts to manage expectations are also ineffective. When German bond yields show that investors expect negative ECB rates for a decade, promising they will not rise until 2021 cannot have more than trivial impact.

Despite all this, a mountain of economic commentary is still devoted to predicting minor shifts in central bank policy, and central bankers still obsess over the effectiveness of their communications. Two factors explain this disconnect between economic importance and the focus of economic debate.

The first is that while minor rate changes matter little to consumers and businesses, correctly anticipating them matters a lot to many asset managers, macro hedge funds, investment banks and their investor clients. Central bank-watching is, therefore, a preoccupation for many professional economists. Central bank announcements, with their ability to move markets and the drama of expectations confirmed or disappointed, also create a media buzz.

For financial investors “mixed messages” from central bank governors can turn potential speculative gains into embarrassing losses. When a member of the UK House of Commons Treasury select committee accused BoE governor Mark Carney of being like an “unreliable boyfriend”, it made for good headlines. But, in an era of structurally low interest rates, uncertainty about the timing of small future changes is just not that important.

Monetary easing can have a significant stimulative effect if interest rate changes drive currency depreciation. But that is a zero-sum game. US president Donald Trump wants a weak dollar, while China is allowing the renminbi to depreciate to offset the impact of his tariffs. No exchange rate policy can stimulate both economies.

The second factor is the fear of what follows if monetary policy has become powerless; for either we can then do nothing to offset potential recessions or fiscal policy must take the strain.

But higher fiscal deficits mean rising public debt, unless they are financed with central bank money, and the latter seems to threaten central bank independence. So, for fear of finding something worse, central bankers cling to the hope that some sophisticated wrinkle of monetary policy will at last be effective.

However, large fiscal deficits and forms of monetary finance are already major drivers of global growth. In the spring of 2016, there were fears that central banks were “out of ammunition”. But, triggered by the Trump administration’s 2017 tax cuts, the US fiscal deficit has risen to today’s 4.5 per cent of gross domestic product.

China’s fiscal deficit has grown from 2.8 per cent of GDP in 2015 to 6 per cent in 2019, with some of this financed by People’s Bank of China lending to state-owned banks to buy public bonds. Japan has run large deficits for a decade, fully matched by Bank of Japan purchases of government bonds, which will never be sold back to the private sector. And while Germany has stuck to the path of fiscal rectitude, its growth has relied on exports to these profligate rule breakers.

It is the eurozone that now faces the greatest danger. The Fed’s funds rate is now at 2-2.25 per cent, so the US can still cut by enough to make some difference — and if the economy continues to slow, the Trump administration will unleash increased spending or further tax cuts.

Meanwhile, China and Japan will continue to run large fiscal deficits indirectly financed by their central banks. For the UK, as a smaller economy, exchange rate depreciation is a more powerful option than elsewhere.

But if global demand and eurozone exports remain subdued — and hardliners continue to block a European version of fiscal relaxation lubricated by central bank government bond purchases — there is no feasible action the ECB can take that will make more than a trivial difference to eurozone growth.

The truth is that, acting alone, central bankers are no longer that important.


The writer is a former head of the UK Financial Services Authority


What a Recession Would Mean for Brazil

The country’s recent economic figures aren’t inspiring much hope that it will return to high growth rates.

By Allison Fedirka

 
It’s easy to see why the estimates are so pessimistic; the country’s economic activity index – seen as an indicator of growth – declined by 0.13 percent in the second quarter, and the economy contracted by 0.2 percent in the first. Another consecutive quarter of contraction would put the country in a technical recession.
Either way, the Brazilian economy is clearly struggling, and the government appears to be preparing for the worst, introducing stimulus measures to try to boost growth.
 
Slow and Painful
Brazil’s modest recovery from its two-year recession has been slow and painful. Since 2017, the government has adhered to budget spending caps and has slashed spending on social programs. Unemployment reached 12.7 percent in the first quarter of this year, and though it has since fallen to 12 percent, it remains well above pre-recession levels, and an additional 28.5 million Brazilians (25 percent of the working-age population) are considered underemployed.
Productivity has dropped as more people settle for informal work or leave the workforce altogether. Research from the Brazilian Institute of Economics found that labor productivity fell 1.1 percent in the first quarter of this year, led by declines in the manufacturing and services sectors.
The deceleration is even more stark when compared to the 2.8 percent increase in productivity in the last quarter of 2018. Real income has also declined throughout the year. In May, the average household monthly real income was 2,280 reals ($560), down 1.5 percent from the previous quarter.

To address these issues, the government of President Jair Bolsonaro has made structural reforms a top priority. The cornerstone of the reforms has been changes to the pension system – including an increase in the retirement age – through which the government hopes to save $800 billion to $900 billion over the next 10 years.
According to the Bolsonaro administration, spending on social security and other social assistance programs in Brazil ranks among the highest in the world, and it’s becoming a bigger burden as the Brazilian population ages and its growth rate declines.
 
 
The government’s structural reforms also include privatization efforts to reduce support of unprofitable companies and public sector presence in the economy. In agriculture, the government has moved away from subsidizing production in favor of new and larger lines of credit for farmers. There are also proposals for modifying labor laws to generate more jobs. It’s hoped that deregulation will make it easier for companies to do business in the country and, therefore, attract more private investment at a time when the government’s own ability to stimulate the economy through spending is limited. To that end, the government has introduced the Direct Investment Ombudsman, whose purpose it is to support foreign investors with general inquiries and questions over legislation and administrative procedures related to investing in Brazil.

Several factors, however, have complicated these reform efforts. Passing social security changes is challenging in any country, but it is especially so in a country as diverse and divided as Brazil. Brazil’s lower house has approved the pension reform bill, but the Senate has yet to vote on it. And as economic growth has stalled, the government has had to repeatedly cut back spending to meet the self-imposed spending cap. It froze $2.2 billion in spending in late May and another $2.3 billion in late July. Despite these cutbacks, the government is at risk of exceeding its budget deficit target of 139 billion reals for the year because of lower-than-expected revenue. It has worked with state-level governments, which are also struggling financially, to harmonize national and state plans and avoid state bankruptcies.
 
 
The U.S.-China trade war is also partly to blame. Exporters and major industries across Brazil delayed or reduced (by hundreds of millions of dollars) investment plans because of the trade war, and there’s growing concern that, as the war escalates, Brazil’s window of opportunity for recovery will narrow.

Meanwhile, the country’s third-largest trade partner – Argentina – is in the middle of a recession, which has naturally hurt bilateral trade. Argentine purchases of Brazilian products fell 41.7 percent to $5.3 billion in the first half of 2019. This has significantly affected Brazil’s automotive industry, and it’s a major reason that Brazil’s manufacturing sector has struggled over the past two years.
 
Introducing Stimulus
The government has therefore introduced some economic stimulus measures. Though it initially wanted to hold off on a major stimulus package until after the reforms were implemented, the government believed it could no longer wait to try to encourage spending. In July, the government loosened rules over when and how workers can access their FGTS retirement accounts. (Previously, these funds could be accessed only in case of retirement, severe illness or to purchase a home.)

The measure is expected to inject up to 42 billion reals into the economy by 2020. Another 21 billion reals were made available through another social welfare fund, but only 2 billion reals are expected to be redeemed. This month, the government also announced plans to reduce the financing rate by as much as half for home buyers. For its part, the central bank said that, for the first time in 10 years, it would sell dollars on the spot currency market because of increased demand for liquidity – a move previous administrations were very reluctant to allow for fear of draining its foreign reserves.
 
 
The government has tried to encourage trade to supplement weak domestic demand. In the past, domestic demand has been a major driver of the Brazilian economy, while exports have accounted for only 15 percent of GDP. But after two years of recession and a weak recovery, domestic demand has slipped, and there’s an increasing need to look to foreign consumers.

But Brazil’s top three export destinations – China (27.6 percent), the U.S. (13.4 percent) and Argentina (4.7 percent) – are all showing signs of downturn. This explains in part why Brazil has worked to loosen trade restrictions within Mercosur – the South American trade bloc consisting of Brazil, Argentina, Uruguay and Paraguay – and why, after 20 years of negotiations, Brazil helped push through a free trade agreement between the European Union and Mercosur. The agreement hasn’t been ratified yet, but Brazil is already pursuing free trade agreements with other partners, including the United States and South Korea, and it reached a trade deal with Mexico on light vehicles, subject to a 40 percent regional content requirement, after six years of talks.

The government introduced several measures to try to recover from its last recession – measures that are now being used to stave off another downturn. It finds itself in the same position as many other major economies trying to avoid recessions of their own. More changes – including another possible stimulus package – may be on the way, and with an interest rate at 6 percent, there’s room for maneuver on monetary policy, too. 

But whether these steps are successful in preventing another major downturn remains to be seen.