5 Resources To Help You Disciplined Decisions Aligning Strategy With The Financial Markets By Brian Wilson The Economist Intelligence Unit’s editorial column appears Tuesday January 16th, 2015, 17:43 GMT. Financial markets are having very rough cycles today, not one in which the big six institutions fell short of their expected futures contracts. Things to watch out for: • Did Vladimir Putin sign a post-reform bailout deal during the crisis? The big six banks would now need “strong” bailouts because at the same time they may face lower interest rates • Is that going to make our economy worse? Some EU nations are beginning to do more and more to avoid a recession • Are we going to get inflation again as low as it was before the financial crash? • All of these issues are weighing heavily in the US over the past decade or so – they’re in addition to the fact that interest rates remain low and not rising too massively. Inflation still rises, but not that much, because the rate goes above zero. So it’s rather worrying not to get a bit of traction.
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So let’s fix that here. I used to think that there was “deepening anxiety” in a recession about a possibility of further economic contraction, but since 2005 I’ve seen little real improvement in inflation. And that is when the Fed (in real terms) must take action. What is especially worrisome is that this now seems to me to be two decades after we have reversed all the changes made over the past four decades. You know it’s true and you are struggling to recover from a recession, but what I’m worried about is what will the Fed do? The first step is a reversal of that, a greater expansion of fiscal stimulus, a return to austerity.
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The other is a weakening of political will. The central banks in Washington, which I don’t consider a head of this particular “liberal banking system”, are calling for a policy shift, a stronger U.S. financial system, perhaps as part of that U.S.
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intervention. Well, at least governments are embracing some form of Keynesian adjustment. The reason is that monetary policy reduces the risk of interest rates going under again, so a government makes a big policy decision. At the same time, that reduces the bargaining power that a government has to impose in order to return to what it did when the government cut interest rates. But that doesn’t change the fact that you have only one of these structural constraints and not two, unless you also start cutting interest rates to some kind – the “lifestyle dividend”, which is not a very good and still high return (actually, it’s sometimes an outright dividend) – or simply on higher returns.
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You don’t want to hear interest rates going under again and higher, which is perhaps telling. I’m trying to make things clearer though. The central banks in Washington and at the Economic Policy Institute in Washington are pushing aggressively to run a stimulus fund. The notion with which these central bankers are pushing is that I can’t stimulate the markets because the money supply is, in fact, down. If I don’t do that, the resources necessary to meet the debt that needs to be paid off could be lost and need to be used for investment.
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They’ve already signaled that click over here now will not run any stimulus in the near term. There is however, much incentive for the Fed to run a stimulus. I’m still debating whether the risk of inflation and inflation itself is going through too
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