The extended period of low growth following the Global Crisis was denoted the ‘New Normal’ by some. This column argues that the period is still ongoing, and would be more usefully described as the ‘New Abnormal’. Far from being an equilibrium, the low growth was achieved by progressively more aggressive and unprecedented monetary policy actions, in response to a series of financial panics. Furthermore, the aftershocks of the Crisis are still colliding with a series of profound structural changes to and instabilities in the global economy.
Author: Edward Harrison
The primacy of monetary policy continues unabated as central banks go further and further down the rat hole of increasingly desperate measures to boost demand. First, it was quantitative easing. Now, the latest scheme is negative interest rates. They tell us that monetary policy is not exhausted and that still more policy initiatives lie ahead, particularly helicopter money. However, we should be sceptical that any of these policies will gain meaningful traction before another economic downturn. Brief comments below
Germany is a member of a currency union over which it has no monetary authority. So no one can accuse the country of ‘manipulating’ its currency. Yet, Germany is displaying huge current account surpluses that are illustrative of a dangerous imbalance which when corrected will cause violent disruptions to trade and lead to populist and autarkic political rhetoric. This is what awaits us when the global economy slows further.
The minutes from the Federal Reserve Board’s last meeting have come out and they are dovish. While on the one hand, we should praise the Fed for showing it is data-dependent just as it has professed to be, on the other hand, the abrupt change in is somewhat alarming. I would suggest the Fed is not necessarily panicked but it is certainly […]
The US economy is not in a recession right now and the latest numbers on US GDP confirm this view. And while the headline growth number was weak, the consumer spending and personal income numbers are supportive of 2%ish growth into 2016. Some brief comments below U.S. GDP growth came in at a very weak 0.7% annualized pace for Q4 […]
The jobs report today was a strong one, underscoring the ability of the US economy to power through. Am I uneasy about where we are in the economic and credit cycle and the accuracy of the Fed’s forward guidance? Yes – and I tend to think most of the risk is to the downside. Even so, there is a Goldilocks scenario […]
As Brent crude hits 11-year lows, it’s worth thinking about why it is so low and what the likely outcomes will be. Warren Mosler has a view I think works regarding the Saudis as swing producer, targeting quantity instead of price and I want to run this concept by you to understand where this is headed. I believe oil is […]
I am uneasy about where we are in the economic and credit cycle and the accuracy of the Fed’s forward guidance. I think we are above stall speed now. But I also think global policy divergence, slowing earnings growth and poor capex numbers could combine to bring on recession in 2016.
Editor’s note: This post was originally published yesterday at Credit Writedowns Pro. I have been pretty sanguine about the markets and the US economy. Yes, the commodities complex is worsening, but that doesn’t mean this feeds through enough into other sectors to force the market down. And the real economy isn’t at stall speed yet either.We just aren’t there yet. Nevertheless, […]
Portugal’s election on 4 October was inconclusive, without any party winning an absolute majority of the votes. The President of the country, a former Prime Minister, allowed his own party, led by incumbent Prime Minister Pedro Passos Coelho to form a new minority government as has been done in the past. However, the way he has gone about doing so has created a controversy, which has made Portugal the new focal point of the still virulent European sovereign debt crisis. While I don’t think this is a coup by any stretch, as some are saying, I do think Portugal has a tough road ahead regarding debt sustainability.
Yesterday I retweeted an interesting tweet by Business Insider’s Henry Blodget which references an article on data compiled by Barclays on profit mean reversion and recession. The gist of the article is that a profits recession generally presages a real recession except perhaps to the degree the profit downturn is caused by the volatile oil sector. While I am not […]
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