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Wednesday, February 24, 2016

Some evening news


Shitty weather today, so I've skipped classes to bring you a bit of news:


Tim Duy the Science Guy - not all Feds on board with March rise. It'll be good if Lael Brainerd manages to get in an "i told ya so" or two at the next meeting, because she seems far more intelligent and circumspect than a lot of the others on that board.


FT Martin Wolf - helicopter drops might not be far away. What did I say about the fall of austerianism?:

The world economy is slowing, both structurally and cyclically. How might policy respond? With desperate improvisations, no doubt. Negative interest rates have already moved from the unthinkable to reality (see charts). The next step is likely to include fiscal expansion. Indeed, this is what the OECD, long an enthusiast for fiscal austerity, recommends in its Interim Economic Outlook. But that is unlikely to be the end. With fiscal expansion might go direct monetary support, including the most radical policy of all: the “helicopter drops” of money recommended by the late Milton Friedman.

More recently, this is the policy foreseen by Ray Dalio, founder of Bridgewater, a hedge fund. The world economy is not just slowing, he argues, but “monetary policy 1” — lower interest rates — and “monetary policy 2” — quantitative easing — are largely exhausted. Thus, he says, the world will need a “monetary policy 3” directly targeted at encouraging spending. That we might need such a policy is also the recommendation of Adair Turner, former chairman of the Financial Services Authority, in his book Between Debt and the Devil.

Why might the world be driven to such expedients? The short answer is that the global economy is slowing durably. The OECD now forecasts growth of global output in 2016 “to be no higher than in 2015, itself the slowest pace in the past five years”. Behind this is a simple reality: the global savings glut — the tendency for desired savings to rise more than desired investment — is growing and so the “chronic demand deficiency syndrome” is worsening.

As noted in the article, the OECD has been pretty consistent in its half-brained defense of austerity, in the face of a savings-investment imbalance, for years now, so the significance of their shift towards recommending government investment should not be underestimated.

And, of course, ultimately it all boils down to a bunch of sixtysomething flaccid micropenises being jealous of Justin Trudeau's manliness.

1 comment:

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