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negative interest rate policy

The New Mercantilism Rates Race to the Bottom Currencies Depreciate

During the recent period of world growth, where nearly every country’s exports were rising, there was little incentive for governments to manipulate economic policies to foster even more economic growth. Getting back to “normal” seemed to be the universally adopted mantra, and that implied rising rates and tighter monetary policies. However, today, when world trade is contracting (some of which may be due to “trade wars,” but much of which is due …Read More

Reconciling a 1-percent economy with record market highs

The recovery from the Great Recession has been the most sluggish in post-WWII economic history.  This is vividly displayed in the nation’s recent GDP report.    The Commerce Department estimated that the economy grew at a snail’s pace over the last 3 quarters: 0.9% in Q4, 0.8% in Q1, and 1.2% in Q2.  Yet, all of the major U.S. stock market indexes recently closed at all-time highs.  For many, warning lights …Read More

Dealing with the ‘New Normal’

In ’09 and ’10, when Mohammed El-Erian and Bill Gross both worked at PIMCO, they put forth a concept they called “the New Normal.” It postulated that the economy would grow at a much slower rate than it had in the past, and therefore market returns – both equity and fixed income – would be much lower than what we had experienced in the post-WWII era. Nice theory, many thought; …Read More

The logic behind Wall Street’s recession fears

To the logical investor, and to most economists, Wall Street’s fear of a U.S. recession appears irrational. Is it? While there is no current evidence that the U.S. has entered a recession, or even that one is approaching, there have been two instances in modern history where the financial markets have precipitated a recession; 1929 and 2001. The negative feedback loop Summed up, the logic is that a bear market …Read More