Tuesday, 26 August 2014

Janet Yellen - barking up the wrong tree

Over the last 40 years (well up until 2008) the role of central bankers was pretty clear – keep inflation under control - and it’s no surprise that during the great inflationary period 1970-2000 monetarist held sway.  Interest rates were raised, money supply was squeezed, unemployment rocketed (and then fell) and it was possible to pronounce the demise of Keynesian economics with complete certainty.  The fun went out of economics - the “Great Moderation” proved that once and for all we were the masters of our own economic destiny.  Then the credit crunch struck and the financial crisis kicked off which in turn led to the “Great Recession”, from which the developed world is still trying to escape.

Thursday, 7 August 2014

Central Bankers - from heroes to zeros

The Bank for International Settlements (BIS), the only institution to call the financial crisis in 2007, has weighed back into the macro economic debate in the last few days in its annual report.  The report sets out a significant criticism on the current crop of central bankers, in essence the BIS lays the blames Yellen and Co for the falling: growth, demand and employment.  The expansion of national balance sheets and negative real interest rates are now the problem not the solution. The Keynesian approach that all central bankers have followed is now coming under close scrutiny as the global economy struggles to gain economic momentum. The process of piling the "cart" with more and more debt means Central Bankers are running a huge risk as the road ahead may not be as smooth as the would like!
Let's hope there are no pot holes ahead

Tuesday, 5 August 2014

La Belle Époque - revisited

As we remember 1914 and the horrific shock that World War inflicted on Europe and the terrible waste of life the two World Wars inflicted it might also be sensible to recognise the economic shockwaves that these events triggered.  The two World Wars and the depression that was sandwiched between them, changed everything economically.  The old colonial powers lost their possessions and incomes from abroad; inflation was unleashed on the world as never before – destroying the inherited capital of the über- rich, labour organised and the world was changed. 1914 destroyed the La Belle Époque and changed almost everything!
By the '50s the old rich where on skid row!

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