Search Results for deflation

inflation course

What About Inflation? When It Will Come?

José Ramón Díez Guijarro (Bankia Estudios) | In the more recent past, the central banks have had enough to deal with trying to combat the risk of deflation linked to the structural changes of recent decades: globalisation, ageing population, digitalisation, etc. And now, practically without any solution of continuity, they have to face a crisis which may lead to new permanent “shocks” in inflation. These would derive from changes in the consumption patterns and from the accelerated digitalisation process. Or from the intensive use of non-conventional monetary policy measures.


negative rates2

The Blunder Of Negative Interest Rates

Miguel Navascués | The depression and the drop in inflation -or even deflation- have led the central banks to try a disastrous experiment: negative interest rates. Even Christine Lagarde speaks of putting the reference interest rate at -2%. This has been a mistake for several reasons. It discourages the holding of liquid deposits (which logically yield zero or negative), but it does not make people anticipate consumption, if prices stagnate or fall.


ECB Lagarde signing

Monetary Policy And Fiscal Policy Merge

Flosbach von Storch | National debt-to-GDP ratios have already reached historic highs. Gross national debt will likely exceed 260 per cent of GDP in Japan by the end of the year, and reach around 140 per cent in the USA and around 100 per cent in the eurozone. Concerns about the high level of debt being unsustainable in the long run are at least theoretically unjustifiable as long as interest rates and government bond yields remain close to zero. This is because zero interest rates allow practically any deficit or mountain of debt to be easily funded.


Bonds

Managing Bonds In The Modern Monetary Theory Era

According to Ray Dalio, the founder of Bridgewater, 90% of governments’ attempts to reflate their economies have ultimately been successful over the past 200 years. In other words, after a few years of monetised deficits, trials and errors by policymakers, inflation will eventually rise.


Covid 19 new cases

Markets: Storm Clouds Ahead

With less than 50 days before the US elections, market participants will be preparing their portfolios for turbulent times ahead. New Covid-19 cases continue to rise, and particularly in some US states and European countries, worryingly so. In our view, the proximity of the elections in the US leaves the debate about further fiscal stimulus in a no-man’s land, where it is difficult to see a quick and impactful resolution. In the picture, new cases of Covid-19 per million inhabitants per day


wages

Wage Income Cut By $3.5 Tr Globally In Q1’19, 5.5% Of World GDP

According to the International Labour Organization (ILO), wage income in the world has fallen by 10.7% in the first nine months of 2020, equivalent to $3.5 trillion or 5.5% of global GDP in the first three quarters of 2019. From the perspective of income, the positive side is that the figures do not take into account government subsidies which have provided a key safety net for families’ vital consumption.


Jerome Powell

FED: Subtle To The Point Of Evanescence

The new strategy plays on the asymmetry of monetary policy: it is easier to let inflation accelerate in good times – which only entails not acting (keeping rates unchanged) – than propping it up in bad times, because at some point the latter would require ever more action which would collide with the zero bound limit to policy rates.


lagarde

“The ECB Is Monitoring Current Developments”

The ECB has left its policy stance unchanged after today’s GC meeting. The tone of the press conference was a touch less dovish than expected and President Lagarde has not signaled any large swing in policy in the near term. The overall message was clear: the ECB is monitoring current developments (including the EUR) and assessing the efficiency of the current policy measures before acting with more accommodation


Japan argentina

Japan And Argentina, Economies Destined To live “Groundhog Day”

Abe’s resignation is not good news as it comes at a critical economic, political and social time. The so-called Abenomics failed to address old structural problems and inflation has continued to be a headache, while wages have not risen as strongly as expected. Along with Japan, there are other economies such as Argentina, where past mistakes have been repeated. Current week the country successfully closed the restructuring of its debt in dollars with private creditors, but still have to recover its financial equilibrium.


negative rates3

Negative Interest Rates: Where Is The Real Limit To Cheap Money?

Interest across the globe on using negative rates as a policy tool has increased with global interest rates moving towards zero in the hopes of pulling economies quickly out of the COVID-19 recession. In a report by Citi GPS, analysts Matt King and Catherine L. Mann look at the positives of negative rates in terms of whether they boost credit growth, stimulate spending, or contribute to currency weakness. More importantly, they explore the side effects negative rates would have on corporates, households, banks, pensions, and markets.