The world economy in crisis

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The world economy faces a significant crisis, stemming from the U.S. subprime mortgage market turmoil that began in 2007, leading to a global recession and financial speculation threatening the European Monetary Union. In response, there has been a notable shift in economic policies and thinking. The Keynesian stimulus packages implemented worldwide have largely mitigated a deeper decline in output, unemployment, and poverty, reinstating fiscal policy as a crucial tool for macroeconomic stabilization. Additionally, there is a growing consensus on the need for stricter regulation of financial markets. Central banks have adopted unconventional measures, including purchasing asset-backed securities to stabilize both the financial system and the economy. However, the crisis also reveals deeper structural issues, such as rising income and wealth inequalities over the past three decades and global trade imbalances. The effectiveness of policymakers in addressing these challenges remains uncertain. The chapters explore various aspects of the crisis, analyzing its structural causes, evaluating policy responses with a focus on Europe, and proposing reforms for financial markets and a broader Keynesian New Deal.