Crash Course Part 3: The Age of Stagnation?

Crash Course Part 3: The Age of Stagnation?

photo: Ken Teegardin There are now three possible scenarios for the global economy and financial markets. The first is the Lazarus economy, where the strategies in place lead to a strong recovery. The US leads the way. Europe improves as the required internal transfers and rebalancing takes place with Germany accepting debt mutualisation to preserve the […]

Crash Course Part 2: Crisis Triggers

Crash Course Part 2: Crisis Triggers

photo: Flood G. Triggers There are a number of potential triggers to a new crisis. The first potential trigger may be equity prices. The US stock market runs into trouble. A stronger dollar affects US exports and foreign earnings. Emerging market weakness affects businesses in the technology, aerospace, automobile, consumer products and luxury product industries. Currency […]

Crash Course Part 1: The Problems of Overvalued Assets & High Debt

Crash Course Part 1: The Problems of Overvalued Assets & High Debt

photo: pixabay In economics and finance, over-valued assets and excessive debt levels generally do not lead to happy endings Nutty Shares… Over the last 5 to 6 years, mispricing of assets has reached epidemic proportions. Global equities prices have increased strongly. Sell side analysts anticipate further gains, arguing that the falls of August 2015 and […]

Part 3: Reforming China – Changing the Software

Part 3: Reforming China – Changing the Software

Beyond purely economic and financial objectives, the reform process in China must meet welfare, demographic, environmental and governance challenges.  The People’s Welfare… Increasing consumption requires increases in household income, reduced savings or a combination. This requires increasing wage levels and employment levels.  Increasing consumption will require reform of the welfare system, especially health, education and […]

Part 2: Financial Reform in China – Don’t Bank It!

Part 2: Financial Reform in China – Don’t Bank It!

photo: David Dennis The Chinese brand of state corporatist model based on credit driven investment is designed to deliver growth. The strategy requires the government to exert significant power over the economy, with the ability to intervene in economic activity and allocate resources. In practice, this is done through the SOEs and especially control of the […]

Part 1: Reforming China – Rebooting the Economic Engine

Part 1: Reforming China – Rebooting the Economic Engine

photo: tammy c. Over the last 35 years, China has emerged as a major global economy, with average annual growth rates of 9.7% which have been pivotal in helping raise between 400 and 600 million Chinese out of poverty. Commentators have run out of hyperbole to describe the development. Justin Lin Yifu, a former chief economist […]

Part 4: QE Forever?

Part 4: QE Forever?

photo: 401(K) 2012 Compounding the problems of ineffectiveness and toxic side effects, current policies cannot be reversed easily, if at all. Withdrawing fiscal stimulus would lead to sharp slowdowns in economic activity. Reduction in government services and higher taxes accelerates contraction in disposable incomes, especially in an environment of stagnant incomes and uncertain employment. In turn, […]

Part 3: The Ineffectiveness of Economic Policy

Part 3: The Ineffectiveness of Economic Policy

photo: Nicolas Raymond While the central bank and government policies have stabilised conditions, they have not restored growth or created sufficient inflation to address the world’s debt problems. As Helmuth von Moltke, a 19th century head of the Prussian army, observed: “No battle plan ever survives first contact with the enemy”. Given that the bulk of […]

Part 2: Monetary Madness

Part 2: Monetary Madness

photo: againstcronycapitalism  Central banks have reduced official interest rates to historically lows, either near zero (known as ZIRP or Zero Interest Rate Policy). Long term bond rates are also at historically low levels. In some parts of the world, interest rates are now negative; that is, you get paid to borrow and punished if you save. […]

Part 1: Fiscal Failure

Part 1: Fiscal Failure

photo: Nicolas Raymond The stubborn refusal of the global economy to respond to policy initiatives is reminiscent of an obstreperous teenager. There is now renewed focus on using government spending on infrastructure to stimulate the global economy. It is not clear whether such a policy will work. Efficacy of stimulatory fiscal policy depends on a number […]

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