Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Stimulus’

The Allure and Limits of Monetized Fiscal Deficits

Posted by hkarner - 30. Oktober 2019

Nouriel Roubini, Professor of Economics at New York University’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.

With the global economy experiencing a synchronized slowdown, any number of tail risks could bring on an outright recession. When that happens, policymakers will almost certainly pursue some form of central-bank-financed stimulus, regardless of whether the situation calls for it.

NEW YORK – A cloud of gloom hovered over the International Monetary Fund’s annual meeting this month. With the global economy experiencing a synchronized slowdown, any number of tail risks could bring on an outright recession. Among other things, investors and economic policymakers a renewed escalation in the Sino-American trade and technology war. A military conflict between the United States and Iran would be felt globally. The same could be true of “hard” Brexit by the United Kingdom or a collision between the IMF and Argentina’s incoming Peronist government. 

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Many think the European Central Bank will cut rates soon

Posted by hkarner - 21. Juli 2019

Date: 18-07-2019
Source: The Economist

But for a significant stimulus, the bank will need to break self-imposed rules

The european central bank’s firepower is sadly depleted. The interest rate on the reserves that banks hold with it is sub-zero; its quantitative-easing (qe) scheme has hoovered up assets worth €2.6trn ($2.9trn)—equivalent to over a fifth of the euro area’s gdp. Even so, in June Mario Draghi, the bank’s boss, promised further stimulus if the economy does not buck up. Statistics published since then suggest little recovery. Cue much speculation about another attempt to revive growth.

Many expect an announcement at the bank’s meeting in September, along with updated economic forecasts. But its next gathering on July 25th could still surprise, or at least lay the groundwork for stimulus. With individual instruments nearing limits, it is expected to deploy a combination. Den Rest des Beitrags lesen »

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ECB Officials Signal Intention to Launch Fresh Stimulus

Posted by hkarner - 12. Juli 2019

Date: 11-07-2019
Source: The Wall Street Journal

Minutes for June meeting suggest ECB could cut interest rates or restart its $2.92 trillion bond-buying program

ECB President Mario Draghi had disappointed investors by suggesting the eurozone economy would need to soften further before the bank would act.

FRANKFURT—Top European Central Bank officials signaled at their June policy meeting that they will consider injecting fresh stimulus into the eurozone economy soon in light of weak inflation data and mounting global uncertainties.

ECB policy makers are preparing to act to support the region’s export-focused economy by cutting the bank’s key interest rate, currently set at minus 0.4%, or restarting its €2.6 trillion ($2.92 trillion) bond-buying program, according to the minutes of the policy meeting published Thursday.

“There was broad agreement that, in the light of the heightened uncertainty, which was likely to extend further into the future, the governing council needed to be ready and prepared to ease the monetary-policy stance further by adjusting all of its instruments,” the minutes said. Measures to be considered included rate cuts and fresh bond purchases, the notes said. Den Rest des Beitrags lesen »

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Should egalitarians fear low interest rates?

Posted by hkarner - 11. Juli 2019

Date: 10-07-2019
Source: The Economist: Free exchange

Monetary stimulus is said to have been a boon for the rich. It is not so simple

JOHN MAYNARD KEYNES once fantasised about a world of permanently low interest rates. In the final chapter of “The General Theory” he imagined an economy in which abundant available capital causes investors’ bargaining power, and hence rates, to collapse. In such a world markets would reward risk-taking and entrepreneurial talent, but not the mere accumulation of capital. The result would be the “euthanasia of the rentier”.

That low rates could feature in a leftish Utopian vision might come as a surprise today. It is commonly argued that a decade of monetary-policy stimulus has filled the pockets of the rich. Low rates and quantitative easing (QE) are said to have sent stock and bond markets soaring, thereby exacerbating wealth inequality. They have also boosted house prices, adding to intergenerational tension. A glance at financial markets suggests more of the same is coming: long-term rates have tumbled this year in anticipation of monetary easing, while stockmarkets have boomed. Den Rest des Beitrags lesen »

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From Economic Crisis to World War III

Posted by hkarner - 7. Dezember 2018

Qian Liu

Qian Liu is an economist based in China.

The response to the 2008 economic crisis has relied far too much on monetary stimulus, in the form of quantitative easing and near-zero (or even negative) interest rates, and included far too little structural reform. This means that the next crisis could come soon – and pave the way for a large-scale military conflict.

BEIJING – The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict.

The 2008-09 global financial crisis almost bankrupted governments and caused systemic collapse. Policymakers managed to pull the global economy back from the brink, using massive monetary stimulus, including quantitative easing and near-zero (or even negative) interest rates.

But monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.

Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment. Den Rest des Beitrags lesen »

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Why a US-China Tariff Ceasefire Is Coming Soon

Posted by hkarner - 27. November 2018

Anatole Kaletsky is Chief Economist and Co-Chairman of Gavekal Dragonomics. A former columnist at the Times of London, the International New York Times and the Financial Times, he is the author of Capitalism 4.0, The Birth of a New Economy, which anticipated many of the post-crisis transformations of the global economy. His 1985 book, Costs of Default, became an influential primer for Latin American and Asian governments negotiating debt defaults and restructurings with banks and the IMF.

Donald Trump’s negotiating style – “shout loudly and carry a white flag” – may seem incoherent and dishonest, but it has been spectacularly successful for him. And he’s about to use it again with China.

LONDON – The meeting between US President Donald Trump and China’s President Xi Jinping at the G20 summit in Buenos Aires this week is being viewed as a make-or-break moment for the world economy and financial markets. But even if no agreement is reached at the summit, there are at least four reasons to expect a de-escalation of the US-China tariff war.

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ECB Determines Eurozone Still Needs ‘Significant’ Stimulus

Posted by hkarner - 25. August 2018

Date: 24-08-2018
Source: The Wall Street Journal

Minutes from the European Central Bank’s last meeting underscore a widening gulf with the Federal Reserve

The eurozone economy still needs “significant” stimulus from monetary policy to ensure inflation continues to climb, according to the minutes of the European Central Bank’s last meeting in late July.

The ECB’s comments underscore a widening gulf with the Federal Reserve, which in its own meeting minutes released Wednesday signaled plans to raise interest rates further in September from the current range of 1.75% to 2%.

“Overall, the uncertainties around the inflation outlook still called for caution and it was widely felt that monetary policy had to remain patient, prudent and persistent,” the ECB’s minutes said. Den Rest des Beitrags lesen »

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Europe’s Mixed Economic Fortunes Complicate Path for Stimulus

Posted by hkarner - 29. April 2018

Date: 28-04-2018
Source: The Wall Street Journal

Sharp slowdowns in growth in France and the U.K. pose challenge to policy makers at ECB and BOE

PARIS—Europe’s economies displayed mixed fortunes in the first three months of the year, injecting a fresh source of uncertainty as central banks consider further steps to withdraw crisis-era stimulus.

Figures released Friday on gross domestic product—the broadest measure of the goods and services produced in an economy—recorded sharp slowdowns in France and the U.K. But Spain produced steadily strong growth, while Austria and Belgium slowed only slightly.

At the same time, a European Commission survey showed business confidence stabilized in April, suggesting the slowdown in the early part of the year was caused by temporary factors such as poor weather and strikes. Indeed, economic forecasters surveyed by the European Central Bank have raised their growth forecasts for the year as a whole.

The mixed bag complicates deliberations at the ECB and the Bank of England, where policy makers are seeking clearer signals as to the underlying trend before deciding to proceed with reducing stimulus. Den Rest des Beitrags lesen »

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Running the economy hot

Posted by hkarner - 26. Februar 2018

Date: 23-02-2018
Source: The Economist

America will soon conduct an extraordinary economic experiment

WHEN should policymakers stop stimulating an economy? America’s unemployment rate is 4.1%. At such a low level, the Federal Reserve, the central bank, would normally expect inflation to rise. In 2017 the economy grew by 2.5%, spurred by falls in joblessness that cannot go on forever. And inflation—though still below the Fed’s target—has overshot forecasts in recent months. All that might suggest that stimulus has become unnecessary. Yet America is cutting taxes and raising spending. As a result, in 2018 and 2019 it is poised to run an experiment. By stimulating economic activity when times are already good, it will find out what happens when the economy runs hot.

The target at which central bankers usually aim when setting monetary policy is the so-called “natural” rate of unemployment. It is elusive. After the financial crisis, when unemployment rose to 10% but inflation failed to subside, some economists speculated that the natural rate was as high as 6.5%. In hindsight those forecasts were far too pessimistic. Today, after years of non-inflationary job growth, there is a widespread consensus that the natural rate is around 4-5%. But this could be a reflection of groupthink. The natural rate is notoriously hard to estimate. Running the economy hot should reveal with certainty where the limits of the labour market really are. Den Rest des Beitrags lesen »

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What will result from America’s strangely timed fiscal stimulus?

Posted by hkarner - 9. Februar 2018

Date: 08-02-2018
Source: The Economist
Subject: The great experiment

The threat of inflation is less worrying than some investors think

GOOD economic news is not always good for everyone. On February 2nd it was revealed that average hourly wages grew by 2.9% in the year to January—the fastest growth since 2009, at the end of the recession. Stocks promptly tumbled around the world. Investors fretted that inflation might rise, forcing the Federal Reserve to raise interest rates further and faster than expected. Whether the jitters are justified, however, depends on how an extraordinary experiment in economic policy plays out. America is poised to stimulate an economy that is already growing strongly, at a time of historically low unemployment.

Most of the stimulus will come from tax cuts that President Donald Trump signed into law in December. These are worth 0.7% of projected GDP in 2018 and 1.5% of GDP in 2019. On February 18th Senate leaders sketched out a budget deal containing a further fiscal boost. If the proposal passes, defence spending will rise by $80bn this year, pleasing Republicans. Democrats have been offered $63bn in spending on other programmes. The total increase in outlays is worth another 0.7% of GDP. The White House also promises to unveil an infrastructure investment plan on February 12th. Higher spending will add to government borrowing that, after tax cuts, is already likely to reach almost $1trn, or 5% of GDP, by 2019 (see chart 1). Den Rest des Beitrags lesen »

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