Secular Stagnation, Negative Interest Rates, Irrelevance of The European Central Bank, Self-Inflicted Irrelevance of Governments….Helicopter Money for Europe?

It has been noted that the focus of macroeconomics has shifted dramatically after the results of the 2007 credit crunch have made themselves felt through recessions and stagnation: from ‘stabilization-around-a- positive-trend’ to resuming growth –or, at least, avoiding too hard and long a secular stagnation.

My starting point is that the 2007-2008 banking-cum-financial crisis shocked us into realizing that a huge difference had been building between ‘what it was’ and ‘what it will be’. More specifically, I argue that the pre-2007 high per capita income world of high rates of GDP growth, productivity increases, population expansion, government countercyclical policies, and shrinking income inequality, is, more likely than not, gone. Unfortunately, all those characteristics of the pre-2007 period were exactly the causes for growth. It follows that the post-2007 world has to be necessarily a world characterized by slower growth, increasing inequality, ageing population, slowing investment expenditure vis-à-vis increasing saving, and government consciously chosen impotence.

How long will it last? How costly will it be in terms of lost output and permanent fall in potential output?

Continue reading “Secular Stagnation, Negative Interest Rates, Irrelevance of The European Central Bank, Self-Inflicted Irrelevance of Governments….Helicopter Money for Europe?”

Against the European Central Bank (not against the Euro): ECB has chosen not to fight for a stronger Union

The I.M.F is Telling Europe the Euro Doesn’t Work”. So the New York Times titles an article about a hitherto ‘secret’ imf ‘public debt sustainability analysis’ through which the fund, after just six years since the beginning of the so-called ‘Greek crisis’, realizes that the debt is (beg to differ: was made to be, by the fund itself, the ecb and the european commission) unsustainable. More on this document elsewhere and back to the title of the NYT. Continue reading “Against the European Central Bank (not against the Euro): ECB has chosen not to fight for a stronger Union”