Case Name :      The Risks of Global Economic Stagnation

Authors :           David W. Conklin, Guy L.F. Holburn

Source :              Ivey Publishing

Case ID :           9B16M121 / W16426

Discipline :        General Management

Case Length :    07 pages

Plagiarism : NO (100% Original work)

In early 2016, stock markets around the world plummeted, raising the threat of another major depression enveloping the world. In their struggle to recover from the post-2008 global recession, many nations had expanded their money supply and lowered interest rates, with the aim of stimulating both consumer spending and corporate investment. While some of this monetary expansion increased production and employment, much of it created bubbles in asset prices, especially in the prices of equities. Investors faced such low returns from bonds and other fixed-income assets that they poured their funds into equities, which increased price-earnings ratios to exceptional levels. This bubble in stock prices amplified the risks of a severe crash. What could-and should-governments do to avoid a significant stock market crash and a global depression?