BoAML | According to Summers, the main source of weak US and global growth is insufficient aggregate demand. The equilibrium funds rate has dropped sharply so super aggressive monetary policy and asset bubbles are needed to create full employment and normal inflation. By contrast, we have argued that most of the stagnation is coming from the supply side of the economy.
Wang Qionghui via Caixin | China is to impose new tax rules on cross-border e-commerce that experts say will increase the cost of many items such as food, health care products and low-price cosmetics.
If the financial system works with positive interest rates, and a more or less steep yield curve, it will never work with negative short-term rates. The yield curve will never exactly reflect the postive rate curve. Why? Amongst other reasons, because the risk is never less than zero.
The Institute of International Finance (IIF) has announced that the emerging economies attracted $36.8 billion dollars of international investment in March, with $17.9 billion earmarked for stock markets and $18.9 billion for bonds.
In the select club of central bankers it’s fashionable to play around with the idea of negative interest rates. Sweden’s central bank became the standard bearer for this new trend.
UBS | Japanese policymakers have largely succeeded at generating cognitive dissonance rather than resolving the economy’s fundamental challenge. As a reminder it’s not just about achieving a 2% inflation target.
James Alexander via Historinhas | What is more important the short, medium or long term? The recent gyrations of the EUR/USD exchange rate have grabbed a lot of attention since the start of the year. In theory the strong easing bias of the ECB versus the confusing position of the Fed should mean the EUR weakens versus the USD
In the Asia Times there is an article about the tricks China has begun to use to conceal the truth about its foreign currency position. Up until December, China released the two figures corresponding to foreign currency reserves, that of the Central Bank and that of the banking sector (which let’s not forget is state-owned).
BoAML Research | One reason the Federal Reserve has been so dovish recently has been a lack of conviction in wage and price inflation. Fed Chair Janet Yellen ’ s speech earlier this week confirmed that she is not convinced that the recent rise in core inflation would “ prove durable ” and stated that more adverse -than -expected foreign developments could slow the pace of labor market improvement, and with it, “ growth in both wages and prices.
Caixin | Creating a new problem to address an old one may trim the real estate glut in the short term, but it will cause headaches for the economy in the long run.