These four factors all suggest that financial conditions are capable of supporting sustained, solid growth of the U.S. economy. The much-improved profitability can help finance expansion directly out of internal funds or indirectly by supporting firms’ borrowing capacity. Furthermore, firms will be able to draw on the liquid assets that they have accumulated over the past couple of years.
In fact, the current favorable international context and the expansion cycle of the global economy provides an opportunity to learn from the past and to generate persistent institutional changes. In the 1980s, monetary policy acted as a mere financing instrument for unsustainable fiscal policies.