• Smaller government, deregulation  • Bigger government, re-regulation  • Rise of China and emerging economies  • Growth convergence  • Globalization, market integration, global supply chain  • Deglobalization, market fragmentation, economic security  • Large labor supply  • Declining and aging population  • Carbonized  • Decarbonization (greenflation)  • Peace dividend  • Wartime economy 6  Chart 7  Government Spending and Inflation Rates: No Clear Relationship United Kingdom  United States 70  %  y/y % chg. 30  70  %  y/y % chg. 30  60  Government spending to GDP ratio (left scale)  25  60  25  50  CPI (all items, right scale)  20  50  20  40  15  40  15  30  10  30  10  20  5  20  5  10  0  10  0  0 -5 CY 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20  %  -5 0 CY 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20  Germany  %  Japan  y/y % chg. 30  70  60  25  60  25  50  20  50  20  40  15  40  15  30  10  30  10  20  5  20  5  10  0  10  0  70  -5 0 CY 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 Note: Figures for Germany prior to 1991 are those for West Germany.
I would point to three particularly important elements in the policy responses taken so far to address the impact of COVID-19. The first is that swift and abundant liquidity provision by central banks and international organizations prevented the materialization of a negative feedback loop between economic and financial activities.