From Gavyn Davies’ blog on July 9:
The main impetus for the sudden rise in the growth rate in the AEs [Advanced Economies] in the past 18 months has probably come from the demand side of the global economy. Both fiscal and monetary policy have been accommodative in 2016-17, and financial conditions have been very supportive of demand, even in the US where the Federal Reserve has been raising short term interest rates. [Link]
After six years of pulling on a string, some reaction from the demand side coming from financial conditions turning looser. This does not presage a sustained supply-side response. It is unsustainable and unbalanced. Needless to add, unhealthy, too. Policymakers do not appear to have absorbed the lessons of the pre-2008 boom. What about analysts and economists?
Not much to show, I am afraid. The inability of Martin Sandbu to learn from history – recent or distant – and his extraordinarily consistent record of ignoring empirical evidence, marks him out as a quintessential modern economist.
Apparently, Claudio Borio of BIS and the latest BIS annual report (released on June 25, 2017) talk of an extended financial cycle that central banks must respond to. I am yet to read the BIS Annual Report. But, not surprising, coming from BIS. This blogger is aligned with that. But, the Federal Reserve and the European Central Bank are ignoring that warning. As before. Yellen’s testimony on July 12 was inexplicable, to this blogger. My column in MINT tomorrow has a slightly more detailed take on that.
Same old, same old stuff from central banks but the next crisis may not be same old, same old.