In any economic system, the more that the purchasing capacity of money is not utilized or if money is kept stagnant, the more the economic stratum is damaged. If due to huge interest rates charged by banks for credit card debts results in disparities in wealth, then the existing monetary system loses its ability to be the unit of economic equilibrium and stability. Both these factors are being ignored by Fed in its monetary policies. Due to this there is a severe chance of a global economic depression, because of USD being a global trade currency, if Fed does not reform it monetary policies in a timely manner.
During world war II, countries in Europe had to engage in trade related to bullion with other countries. When there is a direct trade in bullion, such countries suffer a partial depression. If countries which are prosperous in various spheres and have their economy unrelated to that of other countries undergoing a depression but invest their wealth in enterprises of a non-yielding nature ( or investments which do not earn any income in return) such as excessive defense spending, superfluous constructions, luxury goods, etc. these countries also eventually suffer from economic depression. Hence, Keeping the defense industry running by means of engaging in unnecessary wars results not only in loss of human lives but such investments also do not yield any returns on their investments.
Only way to avoid any kind of global depression is to reform monetary policies of all countries such that employees’ wages catch up with employee productivity. This monetary policy would also force countries to base their currencies on a gold exchange standard which would essentially stabilize their monetary system, domestic economy and also international trade. Engaging in fair trade for non-perishable goods and free barter trade for perishable goods would eliminate any chances of a severe depression. In this case only a very slight economic recession could take place at the end of every financial year due to imbalances in economic transactions as a result of barter trade of perishable goods.
When something, for some reason or other, descends from its universally accepted position, or its natural value is reduced or brought down, we call it œdevaluation. When the leaders of the state find it difficult to balance the value of the currency with bullion, sometimes they officially reduce the value of the currency. This is called œmonetary devaluation. Such a monetary devaluation leads to a severe economic depression if there is a trade imbalance which results in huge inflation as a result of monetary devaluation. Hence, If any Global depression is to be avoided, monetary policies of Fed needs to be reformed before the Fed ends its QE in order to avoid any devaluation of dollar at later stage. If no Macro financial reforms are observed, an economic depression could be felt throughout US and the world due to inherent defects in the existing monetary policies of Fed.