Ben Bernanke has spent a good deal of time explaining on his blog why he thinks interest rates are so low (something that Martin Wolf wrote a column on earlier this week). An extremely quick and dirty summary is low nominal interest rates and yields can be explained by low inflation, however this doesn’t explain why real interest rates are also low. Bernanke doesn’t think low real interest ra…Read the article
We’ve been worried for years about the prospect of a sharp slowdown in China and the knock on implications for those countries and companies that have grown reliant on a strong China over the last decade, namely commodity exporters, some emerging markets, and particularly emerging market commodity exporters (eg see If China’s economy rebalances and growth slows, as it surely must, then who’s sc…Read the article
Richard Koo popped by our office a few weeks ago to discuss his most recent book The Escape from Balance Sheet recession and the QE Trap. You can see the interview here. We asked who was the Japanese prime minister in 1997 who oversaw arguably Japan’s biggest policy error post the collapse of Japan’s debt fuelled bubble, and the answer was Ryutaro Hashimoto.
It is perhaps a little harsh to im…Read the article
For years the Western world mocked Japan’s attempts to recover from its spectacular debt-fuelled boom and bust, blaming the Bank of Japan for doing far too little and far too late, and lamenting Japanese fiscal stimulus as extreme recklessness, where the only achievement has been to propel Japan’s debt levels into the stratosphere.
Now, seven years after much of the developed world’s own debt …Read the article
As the old adage goes, markets don’t like uncertainty. And yet in just under two months we have a UK election, about which the only degree of confidence that anybody has is that the UK will have a second successive hung parliament – the key question is whether the UK ends up hung to the left, or to the right, or we get a potentially painful outcome somewhere in between.
So we thought it worthwh…Read the article
If at the beginning of 2014 you had made a list of what you thought would be the best performing fixed income asset classes globally for the coming year, it’s very unlikely you’d have put UK index-linked gilts at the top. It’s probably even less likely that you’d have put Argentina’s (hard currency) bond market in second place, especially if you had been told that Argentina would default in 201…Read the article
It has finally happened: the DMO has elected to call and refinance the 3 ½% War Loan, which at almost £2bn in size is by far the largest perpetual gilt outstanding. We’ve been banging on about this for years (see comment from 2011 here), and Jim is worried he hasn’t got anything to write about anymore. Jim typed up a few thoughts after the much smaller 4% Consol was called in October, here are …Read the article
Say what you like about controversial whistleblowing website WikiLeaks and its embattled founder Julian Assange, but the organisation has lifted the lid on a number of rather glorious indiscretions alongside the more serious leak of military secrets that it has become notorious for.
One such nugget to be revealed was how Li Keqiang – now Chinese premier, but at the time the lesser known head of…Read the article
On the right is UK Chancellor George Osborne, the austerity axeman. On the left was opposition leader Ed Miliband, the fiscal freedom fighter. But it now appears that Miliband and co are so alarmed that Cameron and Osborne are better trusted by the electorate to run the now booming UK economy that they are quietly embracing Tory austerity. The Liberal Democrats have accused the Tories of purs…Read the article
So now we know what the Bank of England intends to do about the UK’s housing market, a market that Governor Carney has previously referred to as the biggest risk to financial stability and therefore to the economic expansion (the IMF and the EC had similar warnings).The answer, in short, is not much at the moment – while Carney is not “happy” with the buoyant UK housing market, he is willing to…Read the article