Hedge funds provide liquidity and price discovery in many markets and have fostered financial innovation, so facilitating the distribution of risk within the financial system. Private equity mobilizes risk-bearing capital for investments in companies and generally helps to sharpen a company’s strategic goals. As such, it is beyond dispute that hedge funds and private equity contribute to the functioning of the economy.
The picture was completely different in 1993, when fiscal policy was relaxed, popularly described as a kick-start of the economy. In 1993 Denmark had undergone 7 years with by and large zero growth in GDP. This stagnation was necessary to correct the imbalances of the economy, especially the current account deficit, in the mid-1980s.