MADRID | By Luis Arroyo | There was a deflation period in Europe at the peak of the crisis in 2008-2010. Demand policies all around the world erased it and prices increased to 3% annual rate. Then, the resulting austerity policies brought us back to deflation.
MADRID | By Luis Arroyo | Something is wrong in the “kingdom of the Euro;” it’s just incomprehensible. The ECB is unable to keep the financial and monetary markets alive, which is a huge failure in view of the forthcoming European elections. The following charts show that the euro holds on just because we are asleep.
MADRID | By Luis Arroyo | In the last two years, the FED did not meet the inflation target (the same as the ECB, although the latter has a commitment of 2% tops), which has grown at a slower pace than announced –as we can see in the chart above (by Ryan Avent at The Economist).
MADRID | By Luis Arroyo | Nobel laureate economist Robert Shiller discusses the issue of the so-called “animal spirits” and what should be done in order to pump trust. He uses a visit to Japan as a base to show how effective the politics by Mr. Abe were. Japan is the country that has reduced the gap with the potential GDP.
MADRID | By Luis Arroyo | Journalist Paul Krugman recently published an illuminating article by Samuelson about the (in)efficiency of the monetary expansion by its own when the liquidity trap has been reached. It is a very clear explanation about the problem of the money: central banks don’t create money if banks don’t want to give credit.
MADRID | By Luis Arroyo | The appreciation of the euro, in a deflationary context as the current one, may be the last push so as to cross the ECB’s red line and reach a Japanese style deflation. Macroeconomic variables don’t encourage optimism, especially because inflation in the euro zone is getting closer and closer to the ECB’s zero red line.
MADRID | By Luis Arroyo and Tania Suárez | Credit is still stagnant in Spain and neither companies nor families are able to access money. According to the Bank of Spain, the development of credit in the country is still falling. The conclusion is that there is an insufficient banking money supply with a still very high fall rate.
MADRID | By Luis Arroyo | Monetary policy has worked in the countries which have implemented it without feeling ashamed. The US, UK, Japan or even Switzerland have reactivated their economies and diminished wealth imbalances, at least in comparison with the euro zone. However it is also truth that QE efficiency has performed poorly.
MADRID | By Luis Arroyo | During the so-called Transition period in Spain, a new entrepreneurial force should have arisen, but there was a destruction of the nationalized companies. Thus, the country doesn’t have strong big firms. Something is wrong with the Spanish fiscal system.
MADRID | By Luis Arroyo | This week is tapering week, and we will see the Fed’s first step towards a reduction of the quantitative easing. There is consensus about what the economic data show: every single indicator (except inflation) are more and more vigorous.