Personal interest income will rise as the Federal Reserve raises interest rates. Banks will be slow to raise rates on deposits and on CDs. Nevertheless, as the Fed raises rates, this is a problem.
We are only seven months into Donald Trump’s presidency. And I think we can call it a failure. I’ll have a lot more to say on that momentarily. But I want to flag this as not being a dealbreaker for the US or global economy because people put too much emphasis on the political economy in Washington. But Donald Trump is failing.
Underconsumption is the term we’re now using to describe the thesis that we are living in a world of excess supply. The novelty here – as I pointed out yesterday – is not that the world is oversupplied – and therefore lacking in developed economy private capital investment, but rather that the oversupply situation is longstanding.
Yesterday’s post on the failure of Japan’s monetary policy experiment drew some favourable commentary from a prominent macroeconomist that I want to run by you. The gist of his insight is that we have long been living in an age of an excess supply which is only now being made plain. Let me run the tenor of his comments by you and make some additional ones of my own.
The last few days have made clear that monetary policy is having less and less impact as time goes along.In particular, the latest salvos from the Bank of Japan smack of desperation, as if BOJ Governor Kuroda has decided to throw everything but the kitchen sink into his grab bag of unorthodox monetary policy. Because the Bank of Japan is so far along the curve toward both secular stagnation and unorthodox policy to counteract that slowing, we should pay attention to how their experiments go. I do not expect good results.
The global economy is an economic system in which any country’s domestic economy is inextricably linked to other economies through the balance of payments mechanisms. The ability to place events within their global context is consequently crucially important in understanding any country’s economic performance, but actually doing so tends more to be the exception than the rule.
Monetary offset, fiscal determinism and asset bubbles: a Wynne Godley-style mental model for US economic forecasting (wonkish)
Yesterday was a big conference day in Washington, D.C., with the IMF and World Bank meeting and with the Brookings Institution holding an event featuring the Greek and German finance ministers. While I attended the Brookings event, the event I thought most interesting was the 24th Annual Hyman P. Minsky […]
By Frances Coppola I do like sectoral net lending charts. This one is from the OBR’s latest Economic Forecast: The thing to remember about sectoral balances is they must sum to zero. It is not possible to have a negative external balance, as the UK does, with concurrent surpluses in […]
By Andrea Terzi originally published at Social Europe and republished with consent of Author The anti-austerity vote in the European elections reflected two different kinds of discontent. One is a feeling of frustration, which is invigorating nationalism: the vote for “less Europe.” The other is a lack of confidence in […]
By Michael Pettis Debate about the global savings glut hypothesis is mired in confusion, a fundamental one of which is the seemingly obvious but false claim that a global savings glut must lead to higher global savings. Here, for example, is a recent piece by one of my favorite economists, […]
This is a loaded topic. This entry, however, is not intended to be political. Very few things in economics are good or bad in themselves, but rather can be good under certain conditions or bad under others. I want to try to tease out as logically as I can the conditions under which rising income inequality can be good or bad for the economy.
In order to understand much of what is happening in China it is important to understand how financial systems operate under condition of financial repression. Because most of what we know about economics is derived from economists whose operating environment is the classical “anglo-saxon” economies, we underrate important economists that don’t follow this tradition, like the German Freidrich List or the American Albert O. Hirschman. And it leads us into mistaken assumptions, like the belief that higher interest rates lead automatically to higher savings rates.