Former Bank of England policy maker Sushil Wadhwani said global central banks need to do “more creative” forms of monetary policy to prevent the global economy slipping into a recession.
“Policymakers need to do three things if they are to prevent a relapse,” Wadhwani said in an e-mailed note co-written with Michael Dicks. “First, they need to get firms better access to credit. Second, they need to help boost demand. And, third, they need to deal with the euro crisis.”
Wadhwani, founder of Wadhwani Asset Management LLP, recommended U.K. authorities take a more direct approach to boosting demand by issuing every adult a voucher that can be spent in the next three months. That is “surely a more effective form of quantitative easing” than the central bank buying gilts, he said.
On Europe’s debt crisis, he said the U.K. and the U.S. can’t afford to “play the innocent bystander and plead with Europe to sort out its mess.”
“Better surely to recognise both the global scale of the problem and the political constraints that are currently limiting European policymakers’ room for manoeuvre, and act in accordance,” he said.