MADRID | Analysts at Barclays said Tuesday in a report that they are less than convinced that the productive capacity of the US economy, the famous output gap, is as large as the Federal Reserve believes. And the consequences of this realisation spell further trouble for any global economic recovery. According to Barclays experts in Madrid, once investors acknowledge that China’s GDP is slowing and that the stimulus measures may…
MADRID | At Barclays Spain, analysts have spotted an oddity. They say that in the United States market participants seem to discount two elements that appear to be contradictory: on one hand, that the Federal Reserve will keep its expanding monetary policy going on for the time being, something that Ben Bernanke would have made clear last Monday; and on the other hand, that the US economy will grow above expectations. “but the…
By Luis Arroyo, in Madrid | The US economy is on its way up to the growth heaven while others, like Europe, live under the knife. Broad money or M3 volumes have increased in the US by 10pc. In terms of what it is strictly required, the Federal Reserve is fulfilling its duties. The broad money supply includes factors of money supply and money and credit demand, which means that there is activity in all money and financial markets. The…
His message was clear, no frills: “We are paying the consequences of Germany and France breaking the Fiscal Pact in 2003,” stated Spain’s economy minister Luis de Guindos on Friday at the Brookings Institution think tank in Washington. In his first official visit to the US, Mr De Guindos tried to spur US confidence, explaining the key points of financial and labour reforms in Spain. “Europe and Spain’s main problem…
“We have a plan to combine fiscal consolidation with structural reforms in order to jumpstart growth in the country and help stabilize the euro area.” This was the core message of the Spanish minister of Economy and Competiveness Luis de Guindos’ speech on Friday at the Brookings Institution, a center-left Washington-based think tank. In his first official trip to the US, De Guindos also held a meeting with the most…
By Juan Pedro Marín Arrese, in Madrid | Markets around the world are flooded with huge loads of fresh cash pumped in by central banks. The balance sheets of central banks have tripled since 2008. And yet monetary supply is lagging behind. Don’t put the blame on banks. Their assets are shrinking as a result of the massive reshuffle in credit exposure undertaken by enterprises and individuals. A grim outlook is…
By Juan Pedro Marín Arrese, in Madrid | Economics is not a science but rather a common sense attitude. An open mind approach is vital to grasp its core meaning. Policing it shouldn’t be handed over to people too fond of rigid rules. Let the Germans have a go at it and you’ll end up with a neutral fiscal and monetary stance all year around. No policy at all, in fact….
By Alfredo Aranda, in Madrid | The course of the euro seems to be clearly bearish, according to some analysts. However, in contrast with previous situations, the depreciation of the single currency is more the result of the actions of the ECB than due to traditional factors such as monetary or economic policies. According to Alberto Matellán, the liquidity injection carried out by both the Fed and the ECB are directly…
By Luis Arroyo, in Madrid | The Ralphanomics blog has a post on velocity of circulation of money that brings a very interesting intuitive graph: how the velocity of money (M1) has changed since the crisis began. Against this variable, there is a comparison to the 1930s Great Depression –the black line at the right angle, between 1920 and 1932. The velocity of money is simply the GDP divided by money…