The central banks of developed countries implement adaptive monetary policies to support the economy in the context of the coronavirus pandemic. The most actively used tools of their policies were lower interest rates, additional buyback of government bonds, easing reserve requirements for financial institutions and for collateral provided by financial organizations. This policy resulted in an increase in the budget deficit and a rapid increase in public debt.
According to an IMF report, the budget deficit in developed economies averaged 13.3% of GDP in 2021, which is 3.3% higher than 2019. In December and March 2020, the US Congress adopted an economic stimulus package worth more than $2 trillion. The US budget deficit increased from 4.6% of GDP in 2019 to 15.2% of GDP in 2020, which is the highest since 1945. For comparison: during the financial crisis in 2009, it amounted to 1.4 trillion dollars, or 9.8% of GDP. Even Germany, a country known for its fiscal conservatism, has a fiscal deficit in 2020. The government decided to issue bonds, along with other EU countries, although this was previously considered unacceptable in the context of state economic policy. The IMF has always advocated austerity measures and a balanced budget, so it has begun to call for additional financial incentives to combat the economic crisis. As a result, gross global debt has approached 98% of global GDP in 2020, and is projected to reach 99.5% by the end of this year.
It is important to note that the policy of the authorities was not limited to providing assistance to financial institutions and large companies, as was the case in 2009. Money went to the economy through non-financial institutions and to personal accounts of citizens. Direct remittances to the population set a dangerous precedent. If all funds had been sent to financial institutions, they would have contributed to raising the value of business shares. However, the universal basic income actually used by the authorities of leading countries has enormous fiscal costs and can lead to negative economic and social consequences.
Increasing the role of fiscal policy in achieving macroeconomic goals increases the risk of rising inflation and macroeconomic instability. High official inflation and relatively low stock prices should keep gold high, as investors see precious metal as a means of hedging risks.