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Showing posts from August, 2016

You can lower interest rates but can you raise inflation?

Last week the Bank of England lowered their interest rates. This combined with previous moves by the ECB and the Bank of Japan and the reduced probability that the US Federal Reserve will increase rates soon is a reminder that any normalization of interest rates towards positive territory among advanced economies will have to wait a few more months, or years (or decades?). The message from the Bank of England, which is not far from recent messages by the Bank of Japan or the ECB is that they could cut interest rates again if needed (or be more aggressive with QE purchases). Long-term interest rates across the world decreased even further. The current levels of long-term interest rates have made the yield curve extremely flat. And in several countries (e.g. Switzerland) interest rates at all horizons are falling into negative territory. The fact that long term interest rates is typically seen as the outcome of large purchases of assets by central banks around the world. In fact, many se...

Experts, facts and media

Jean Pisani-Ferry  has written a very interesting post about the need for trusted experts in a democracy. The post addresses the criticisms that economic experts have received as a result of the Brexit vote. Quoting from his post: "Representative democracy is based not only on universal suffrage, but also on reason. Ideally, deliberations and votes result in rational decisions that use the current state of knowledge to deliver policies that advance citizens’ wellbeing." Very well said. He also brings up the point that the lack of influence of economic experts is not that different from that of other experts (as illustrated by the debates on climate science, GMOs,...). I share that view and my guess is that the mistrust of economic experts is simply more visible because of their influence (or lack of) in the political debates that tend to be a lot more present in the media than the debates on scientific issues. How to enhance the trust on experts? Not obvious, according to Pis...