Monday, March 7, 2016

Europe is Aging

Wednesday, February 24, 2016

Helicopter drops -- a potentially temporary respite to longer term stagnation

For the whole article, go here.
It has been argued for as long as this blog has existed that following the global financial crisis of 2008 there would not be a return to rate normalization. In the absence of meaningful real wage increases for the masses, and the added onus of an ever expanding wave of retirees being ostensibly supported by an ever shrinking bracket of working age individuals, helicopter drops courtesy of central banks would provide an albeit temporary catalyst to growth. Political economy trumps economics. There are serious distributional aspects that are not being addressed and these will be exacerbated by technological advances and shifts.

Tuesday, February 23, 2016

Thursday, February 18, 2016

How negative can you go?


The spectre of negative interest rate policy (NIRP) in the Eurozone (at least) was floated at least six years ago. What monetary theorists need to understand is that bank systems weren't (at that time) and in some cases still aren't set up to accommodate such policy ad inifnitum. Not all bank systems are created equal. Even if NIRP for overnight deposits makes loans to businesses and mortgages more attractive (in theory), in practice wholesale funding costs may make it untenable in practice due to a potential liquidity crunch. There are of course a multitude of other factors at work --no amount of monetary massaging will solve the serious distributional issues exacerbating inequality-- but we are loathe to think outside the bounds of what is expressible to the orthodoxy.

Wednesday, February 17, 2016

Unicorns without bite

For a bite one needs fangs, or more accurately "FANG"s which investors will know refers to the stock darlings Facebook, Amazon, Netflix, and Google which collectively have been a performance outlier amid the equity market sell off since the beginning of 2016. Here is JP Morgan strategist Michael Cembalest's chart on how poorly Unicorns have fared over the past 980 days (to February 16, 2016).