Post Tagged with: "Fiscal"

Understanding what a neutral macro-economic policy looks like






This is going to be a quick follow-on to the last post on monetary policy as the only game in town. I feel like the obvious question that post doesn’t answer is this one: what other policy tools we should use? And I want to tee up that question with this post.

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Secular stagnation is a policy choice

Secular stagnation is a policy choice






In my most recent posts, I have been saying that bond markets are pricing in secular stagnation scenarios based on how shallow the yield curve is. But secular stagnation is a policy choice. And that is something I thought I should highlight in view of UK Prime Minister Theresa May’s change of heart in pursuing austerity. Some comments below






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Anarchy in UK politics means lower yields and ends austerity as we know it

Anarchy in UK politics means lower yields and ends austerity as we know it






There are several threads I want to comment on in the wake of the UK general election. And from an economic standpoint, the conclusion that follows is that austerity in the UK has now lost its appeal politically. It also means lower yields for longer. Let me explain how I came to this conclusion.






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The threat of an overheated German economy

The threat of an overheated German economy






The Eurozone economy is doing really well. Some data points to 3% growth. The German economy is doing even better – with some data pointing to 5% annualized growth. But there’s a downside – overheating. And with the ECB at negative rates and engaged in 60 billion Euros of QE to boot, overheating in Germany is a reasonable fear. Some thoughts below






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Some thoughts on Dijsselbloem’s ‘liquor and women’ intervention






Last week, I wrote how the Labour Party in the Netherlands suffered a historic defeat in parliamentary elections because voters questioned their priorities – and how this is emblematic of Western social democratic parties everywhere. And as if to prove my point, Dutch finance minister and Eurogroup leader Jeroen Dijsselbloem has produced an analogy on fiscal spending about ‘liquor and women’ that has outraged many. Let me put his comments in the proper context here to make a wider point about the European Union.






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Germany leading by example

Germany leading by example






Here’s an example of Germany’s leading by example on fiscal policy.






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Two things you should know about Germany’s budget surplus

Two things you should know about Germany’s budget surplus






You probably heard that Germany recorded its third consecutive year of government budget surpluses. This year it was the highest full year surplus since German reunification – 24 billion euros. A lot of the commentary on this will stress whether it’s a good thing or a bad thing that Germany has surpluses. Forget all of that. There are two other things you need to know.






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The negotiations over Greece aren’t about Greece






Earlier today, I was listening to an interview with IMF head Christine Lagarde dance around the issue of the unsustainability of Greece’s debt load. And she said something very telling. She said that debt haircuts were not on the table but that maturity extensions and interest rate reductions were, but only AFTER Greece implemented reforms demanded by the Troika.






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Monetary policy is at the end of the line

Monetary policy is at the end of the line






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.






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UK fiscal and monetary policy offset to kick in, bullish for gilts

UK fiscal and monetary policy offset to kick in, bullish for gilts






UK Chancellor Osborne has now abandoned his 2020 budget surplus target. Combine this with the dovish statements by Bank of England governor Mark Carney yesterday and you can see some serious policy changes in play to minimize the near-term downside risk. But, of course the risks to the UK are longer-term and the near-term risks are mostly elsewhere in the global economy. I continue to believe this favours safe assets i.e. government bonds.






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The new normal that never was

The new normal that never was






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.






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Bill Gross on helicopter money and Universal Basic Income

Bill Gross on helicopter money and Universal Basic Income






Technological advancement in a world of high private debt means a substitution of capital for labor without big increases in demand. It is a recipe for low or negative growth. Add in demographic challenges in many countries and you have a public policy problem that has been building and will become acute in the coming years. Below I want to say a few words about this problem, inspired by Bill Gross’ most recent investment outlook at Janus Capital.






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