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A monetary-policy regime centered on quantitative easing and zero or even negative interest rates has created an extraordinarily permissive environment for politicians of a certain disposition.Throughout almost all of the advanced economies, monetary and fiscal policymaking are interacting in a new and unique way. Consider, for example, that the German government just issued 30-year bonds with a negative yield. Obviously, the current situation could have far-reaching monetary and distributive consequences, given that governments are gradually expropriating from the traditional rentiers. In Europe, populist governments in Central and Eastern Europe have been especially good at playing the new game.If the opposition pushes new spending proposals, the government can simply adopt those ideas as its own, ensuring its hold on power.Joining the eurozone meant sacrificing some degree of sovereignty over fiscal policy; but membership would bring lower interest rates, thereby reducing the costs of government debt and freeing up resources for other uses.The new narrative that has emerged is ideal for populists.Those who want to restore conventional politics and the old rules find themselves in an unenviable position.
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