The Debt Monster. Daniel Stelter, Dirk Schilder, and Katrin van Dyken. May
|
|
- Isabel Rich
- 5 years ago
- Views:
Transcription
1 The Debt Monster Daniel Stelter, Dirk Schilder, and Katrin van Dyken May
2 AT A GLANCE Unprecedented levels of debt are creating the conditions for higher-than-expected inflation. W G I N A In many countries, GDP growth is lower than the rate of interest on the debt, causing debt as a percentage of GDP to grow not decline. T D B A R By slowing GDP growth, austerity could actually raise the debt burden. And restructuring could damage the financial sector, which holds the debt. T I S Higher-than-expected inflation would reduce the debt burden for governments, companies, and consumers. P L F Inflation may be preferable to being devoured by the debt monster, but it will have profound negative impacts on company profits and enterprise value. T D M
3 I L recent performance of the world economy, senior executives could be excused for thinking that the worst is behind us. According to the International Monetary Fund (IMF), global GDP grew by a record 5 percent in 21 and is expected to increase by an additional 4 percent in 211. Has the recovery finally kicked into high gear? Can we expect smooth sailing ahead? We don t think so. Both private and public debt are at record levels, and they represent a huge burden on the global economy a burden that is likely to be a significant drag on growth in the years to come. Clearly, these high levels of debt need to be reduced, but that is much easier said than done. The only realistic way to reduce debt levels will also lay the foundation for disruptive new crises and a high-inflation economy that will sap business profits and company enterprise value. We call this intractable situation the debt monster. Like any other monster, the debt monster has two parents. One is the so-called Great Moderation the 26-year period from 1982 through 28, during which declining interest rates led to an unprecedented build-up of private debt. The other is the fiscal stimulus almost $6 trillion spent worldwide by governments in response to the global financial crisis and subsequent Great Recession. In many countries, especially the world s developed economies, the result has been a situation in which combined public and private debt as a percentage of GDP has reached unsustainable levels. Exhibit 1 charts both total government debt and government deficits in 21 as a percentage of GDP for 2 countries as well as the euro zone, which includes most of Europe. In a recent article ( Growth in a Time of Debt, American Economic Review: Papers & Proceedings, May 21), economists Carmen M. Reinhart and Kenneth S. Rogoff showed that once total public debt hits 9 percent of GDP, it begins to have a negative effect on economic growth. And keep in mind that Exhibit 1 shows only public-sector debt. When the private-sector debt of both companies and consumers is added to the picture, the total debt burden can be two times GDP (in the case of Germany, for example) to nearly four times GDP (in the case of ). In theory, there are four ways to slay the debt monster: grow out of debt, starve the monster through a policy of austerity, restructure it, or inflate it away. For reasons that we make clear below, the last option is the only one that s practical, and it s why the debt monster will be a major stimulus for global inflation in the years to come. In this article, we focus on the public-debt side of the debt monster. But the argument applies equally to private-sector debt. T B C G
4 E Public-Sector Debt in Many Countries Is at or Above the Reinhart-Rogoff Threshold Public debt burden (as a percentage of GDP) Italy Belgium euro Germany zone Sweden Switzerland Canada Brazil Finland India Australia Denmark China Greece annual deficit (as a percentage of GDP) U.K. Reinhart-Rogoff threshold Government gross financial liabilities ($2.5 trillion) Sources: OECD; BCG analysis. Note: All data are from 21 and include the accounts of central, state, and local governments; social security funds; and nonmarket, nonprofit institutions controlled and primarily financed by government units. Why Growth Is Not the Answer The ideal solution for slaying the debt monster would be for an economy to grow its way out of the problem. But as Reinhart and Rogoff point out, Seldom do countries grow their way out of debts. All else being equal, to grow out of debt, an economy needs to achieve a rate of real-gdp growth that is greater than its real-interest rate. When GDP grows faster than debt (as determined by its interest rate), then debt as a percentage of GDP declines. In many developed economies, however, refinancing costs are expected to be higher, not lower, than real-output growth, leading to an increasing debt-to-gdp ratio. This is the case, for example, in the most troubled economies of the euro zone: Greece,,, and. (See Exhibit 2.) Barring any changes in government spending, those countries will have to issue new debt simply to pay the interest on their existing debt. But even many of the countries whose estimated GDP growth is greater than the interest rate on their outstanding debt will not be able to grow out of their debt, for a simple reason: their debt burden is growing ever larger. In order to stop the growth of public debt, a government also needs to run a primary budget surplus that is, it must bring in more revenues through taxes than it spends in public expenditures (excluding interest payments). Unfortunately, in most countries, debt as a percentage of GDP is already too high and GDP growth rates too low for this to be a realistic option at current tax rates. For ten of the countries in our sample, Exhibit 3 plots the estimated 211 primary budget balance as a percentage of GDP against the required primary budget balance, given the estimated growth rates of these countries. Only Germany and Italy are close to generating the required surplus to stabilize their public-debt burden. The rest will actually increase their T D M
5 E For Most Countries, Growing out of Debt Is Not an Option Growth gap (percentage points) Germany U.K. Italy Greece Sources: Bloomberg; OECD; BCG analysis. Note: The growth gap measures the difference in percentage points between a country s expected GDP growth rate from 211 through 213 and the average yield to maturity of government benchmark bonds with maturities ranging from 3 to 3 months. E Most Countries Are Still Adding to Their Public Debt Expected 211 primary budget balance (as a percentage of GDP) 1 5 Germany Italy Greece 5 U.K Required 211 primary budget balance (as a percentage of GDP) Sources: IMF; BCG analysis. Note: The expected 211 primary budget balance is a government s income minus expenditures (excluding interest payments) as a percentage of GDP in 211. The required 211 primary budget balance is the primary budget balance necessary in 211 for the government not to increase public debt as a percentage of GDP. The calculations are based on interest rates and GDP growth. T B C G
6 debt load in the coming years. Clearly, very few countries will be able to grow their way out of the debt monster problem. The very policies that central banks are pursuing to counter deflation have the effect of greatly increasing the odds that an inflationary cycle will take hold. The Double Bind of Austerity and Restructuring Of course, another much-discussed option for slaying the debt monster is fiscal austerity that is, reducing government spending to such a degree that annual deficits and the overall debt burden decline. The problem with austerity, however, is that it has a major negative impact on economic growth, thus lowering the GDP growth rate and making the debt burden relatively bigger. Governments face the real possibility that the more they save, the more their austerity will cause GDP to shrink, and public debt as a percentage of GDP will grow despite reduced government spending. Whatever one may think of the adequacy of the current Greek government s austerity plan, Greece s economy has shrunk every quarter but one (the second quarter of 29) since the fourth quarter of 28. And in the U.K., another country whose government has embraced austerity, the economy shrank in the fourth quarter of 21 and barely grew at all (.5 percent) in the first quarter of 211. According to the IMF s World Economic Outlook Database, in both countries, public debt as a percentage of GDP is not expected to fall until 214. As an alternative, a country can reduce the value of its outstanding debt by restructuring its loan agreements, which would cause its creditors to bear at least some of the burden of the debt monster. In Europe, strong opposition to the restructuring of Greece s public debt illustrates why this option is unlikely, especially on a broad scale. The fact is that it is the already-stricken European financial sector that owns much of the public debt in Europe. Restructuring that debt, especially in a radical fashion, would undermine the recovery of the financial sector and maybe even throw Europe back into a financial crisis like the global crisis of 28. The Inflation Solution But there is another way to reduce the value of outstanding debt: inflate it away. Higher-than-expected inflation would result in reducing the debt burden not only for governments but also for companies and consumers. For that reason, it is an irresistibly attractive option for policymakers. To be sure, current output gaps, overcapacity, and slow wage growth make inflation seem unlikely. Indeed, these symptoms have many economists worrying about precisely the opposite: deflation. But we agree with the economist Milton Friedman that inflation is always and anywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. The very policies that central banks are pursuing to counter deflation (for example, printing enormous amounts of money) have the effect of greatly increasing the odds that an inflationary cycle will take hold. The world economy is currently characterized by excess liquidity that is flowing into commodities and stocks. Although much of this excess money has yet T D M
7 to reach the real economy, muting inflationary pressures, history has taught us that when central banks rapidly expand the money supply, severe inflation is the result. The European Central Bank s recent interest-rate increase shows that at least some central bankers recognize that inflation is a genuine medium- to long-term threat. But we doubt that that move will be followed by similar moves in other developed economies. Why? The cost in terms of the impact on the debt burden is simply too high. We have created a simulation that shows the effect that rising interest rates would have on interest payments in, the, and eight European countries in our sample. On average, these countries spend about 12 percent of their GDP on interest payments on their total debt (that is, all debt of households, nonfinancial companies, and government) at an average rate of 4.4 percent. But there is a wide divergence around the mean. At one extreme,, with an interest rate of 7 percent, has annual interest payments that are 24 percent of GDP. At the other, has an interest rate that is slightly higher than 2 percent and interest payments that are 8 percent of GDP. Were central banks to, say, double average interest rates a reasonable scenario from a historical perspective a number of these countries would enter the dangerous territory now occupied by. (See Exhibit 4.) Specifically, Greece,, E Doubling Interest Rates Would Raise Interest Payments in Many Countries to Unsustainable Levels Interest payments (as a percentage of GDP) U.K. Greece Italy Germany U.K. Greece Italy Germany = 25 percent of GDP Interest rate (%) Sources: OECD, BCG analysis. Note: Bubble size reflects total debt (households, nonfinancial companies, and government) as a percentage of GDP. The green bubbles illustrate each country's interest burden at current interest rates. The blue bubbles illustrate the interest burden at interest rates twice the current rates. T B C G
8 , and the would each have a total interest burden exceeding 2 percent of GDP. Although there are no official thresholds indicating a point of no return, we believe that these levels are unsustainable. (For a country-by-country analysis of the impact of rising interest rates on interest payments, see The Debt Monster: By the Numbers, a supplement to this report.) Therefore, to keep the interest burden at a feasible level and facilitate deleveraging across sectors, central banks will likely keep interest rates low for some time to come. Higher inflation, despite its considerable costs, will be perceived as preferable to being devoured by the debt monster. Preparing for a Likely Future In conclusion, it seems clear that the debt burden will drive central banks to stimulate economic growth. As a result, they will continue to flood the economy with liquidity by printing money, creating an ever-larger monetary overhang. The widespread availability of cash will create higher volatility in financial and commodity markets and encourage the development of new bubbles as well as disruptive crashes when those bubbles burst. It will also contribute to a much higher probability of inflation, with its attendant corrosive effects on company profits and enterprise value. (See Time to Get Ready for Inflation, BCG article, March 211.) Far from being behind us, the worst may still be ahead. Senior executives need to start preparing for this scenario. (See Making Your Company Inflation Ready, BCG Focus, March 211.) They need to assess their company s vulnerability to inflation by determining its effects on profits and capital expenditures. They also need to assess their organization s readiness to respond. And they need to develop a holistic plan to protect the business from inflation s negative consequences. T company completes this process, the more likely that it will be able to limit the effect of inflation on its business and avoid the negative consequences of the debt monster. The longer a company waits, the harder it will be to respond effectively. T D M
9 About the Authors Daniel Stelter is a senior partner and managing director in the Berlin office of The Boston Consulting Group and the global leader of the Corporate Development practice. You may contact him by at stelter.daniel@bcg.com. Dirk Schilder is an analyst in the firm s Munich office. You may contact him by at schilder.dirk@bcg.com. Katrin van Dyken is an analyst in BCG s Frankfurt office. You may contact her by at vandyken.katrin@bcg.com. Acknowledgments The authors would like to thank Robert Howard for his contributions to the writing of this report, as well as other members of the editorial and production staffs, including Angela DiBattista, Elyse Friedman, and Kirsten Leshko. For Further Contact If you would like to discuss this Focus report, please contact one of the authors. The Boston Consulting Group (BCG) is a global management consulting firm and the world s leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 74 offices in 42 countries. For more information, please visit For a complete list of BCG publications and information about how to obtain copies, please visit our website at To receive future publications in electronic form about this topic or others, please visit our subscription website at The Boston Consulting Group, Inc All rights reserved. 5/11 T B C G
Supplement. The Debt Monster. By the Numbers. Daniel Stelter, Dirk Schilder, and Katrin van Dyken. May
Supplement The Debt Monster By the Numbers Daniel Stelter, Dirk Schilder, and Katrin van Dyken May T the impact of an increase in interest rates on the debt burden in the ten countries in our sample: Japan,
More informationFixing the Euro Zone. Daniel Stelter, Marc-Olivier Lücke, and Dirk Schilder. March 2012
Fixing the Euro Zone Daniel Stelter, Marc-Olivier Lücke, and Dirk Schilder March 2012 AT A GLANCE Although a step in the right direction, the recent haircut imposed on private holders of Greek debt really
More informationUsable Productivity Growth in the United States
Usable Productivity Growth in the United States An International Comparison, 1980 2005 Dean Baker and David Rosnick June 2007 Center for Economic and Policy Research 1611 Connecticut Avenue, NW, Suite
More informationProductivity and Sustainable Consumption in OECD Countries:
Productivity and in OECD Countries: 1980-2005 Dean Baker and David Rosnick 1 Center for Economic and Policy Research ABSTRACT Productivity growth is the main long-run determinant of living standards. However,
More informationHamid Rashid, Ph.D. Chief Global Economic Monitoring Unit Development Policy Analysis Division UNDESA, New York
Hamid Rashid, Ph.D. Chief Global Economic Monitoring Unit Development Policy Analysis Division UNDESA, New York 1 Global macroeconomic trends Major headwinds Risks and uncertainties Policy questions and
More informationExternal debt statistics of the euro area
External debt statistics of the euro area Jorge Diz Dias 1 1. Introduction Based on newly compiled data recently released by the European Central Bank (ECB), this paper reviews the latest developments
More informationImplications of Fiscal Austerity for U.S. Monetary Policy
Implications of Fiscal Austerity for U.S. Monetary Policy Eric S. Rosengren President & Chief Executive Officer Federal Reserve Bank of Boston The Global Interdependence Center Central Banking Conference
More informationEXECUTIVE SUMMARY PRIVATE PENSIONS OUTLOOK 2008 ISBN
EXECUTIVE SUMMARY PRIVATE PENSIONS OUTLOOK 2008 ISBN 978-92-64-04438-8 In 1998, the OECD published Maintaining Prosperity in an Ageing Society in which it warned governments that the main demographic changes
More informationTHE NEW ECONOMY RECESSION: ECONOMIC SCORECARD 2001
THE NEW ECONOMY RECESSION: ECONOMIC SCORECARD 2001 By Dean Baker December 20, 2001 Now that it is officially acknowledged that a recession has begun, most economists are predicting that it will soon be
More informationThe Really Big Picture
The Really Big Picture Debt The Economy Demographics Capital Markets Central Bank Policy Retirement Plans Norwood Economics is a fee-only Registered Investment Advisor specializing in low-cost, small business
More informationProgress towards Strong, Sustainable and Balanced Growth. Figure 1: Recovery from Financial Crisis (100 = First Quarter of Real GDP Contraction)
Progress towards Strong, Sustainable and Balanced Growth Figure 1: Recovery from Financial Crisis (100 = First Quarter of Real GDP Contraction) Source: OECD May 2014 Forecast, Haver Analytics, Rogoff and
More informationTHE GLOBAL ECONOMY: SECULAR STAGNATION OR RECOVERY AT LAST? Adair Turner Chairman Institute for New Economic Thinking
THE GLOBAL ECONOMY: SECULAR STAGNATION OR RECOVERY AT LAST? Adair Turner Chairman Institute for New Economic Thinking Institutional Money Kongress Frankfurt, 21 February 2017 300 Park Avenue South - 5
More informationFeel No Pain: Why a Deficit In Times of High Unemployment Is Not a Burden
Issue Brief September 2010 Feel No Pain: Why a Deficit In Times of High Unemployment Is Not a Burden BY DEAN BAKER* With the economy suffering from near double-digit unemployment, public debate is dominated
More informationPolicy Reforms after the Crisis
367 Policy Reforms after the Crisis Norman Chan The title of this session is supposed to be policy reforms after the 28 9 financial crisis. I think there s a big question about the title because I m not
More informationEurozone. EY Eurozone Forecast September 2014
Eurozone EY Eurozone Forecast September 214 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Outlook for Cyprus
More informationNegative Yields in the Eurozone: Rationale and Repercussions
The Invesco White Paper Series Invesco Fixed Income Negative Yields in the Eurozone: Rationale and Repercussions When in 1 the European Central Bank (ECB) introduced a negative deposit rate, this was not
More informationInternational financial crises
International Macroeconomics Master in International Economic Policy International financial crises Lectures 11-12 Nicolas Coeurdacier nicolas.coeurdacier@sciencespo.fr Lectures 11 and 12 International
More information2Q16. Don t Be So Negative. June Uncharted territory
2Q16 TOPICS OF INTEREST Don t Be So Negative June 2016 ANDREW AKERS Analyst Following the financial crisis of 2008, slow global growth and low inflation have prompted a number of central banks to implement
More informationEurozone. EY Eurozone Forecast September 2013
Eurozone EY Eurozone Forecast September 213 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Outlook for Germany
More informationEurozone Ernst & Young Eurozone Forecast Winter edition December 2012
Eurozone Ernst & Young Eurozone Forecast Winter edition December 2012 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Luxembourg Malta Netherlands Portugal Slovakia Slovenia
More informationEurozone. EY Eurozone Forecast June 2014
Eurozone EY Eurozone Forecast June 2014 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Outlook for Finland
More informationFinancial System Stabilized, but Exit, Reform, and Fiscal Challenges Lie Ahead
January 21 Financial System Stabilized, but Exit, Reform, and Fiscal Challenges Lie Ahead Systemic risks have continued to subside as economic fundamentals have improved and substantial public support
More informationThe role of central banks and governments in the crisis
The role of central banks and governments in the crisis 87 th Kieler Konjunkturgespräch Kiel, March 18/19 2013 Joachim Scheide, Kiel Institute for the World Economy After the synchronous downturn we now
More informationthe Flight to Equities Continues
the Flight to Equities Continues By Gerry Hansell, Jeff Kotzen, Frank Plaschke, Eric Olsen, and Hady Farag This is the first in a series of articles published as part of The Boston Consulting Group s 24
More informationWorld Economic Trend, Spring 2006, No. 9
World Economic Trend, Spring, No. 9 Published on June 8 by the Cabinet Office Key Points of Chapter 1 (summary) 1. Global price stability: Global economy continues to show price stability and recovery
More informationBACK TO THE FUTURE INVESTORS REFOCUS ON YIELD T BCG I S. By Jeff Kotzen, Tim Nolan, and Frank Plaschke
T BCG I S BACK TO THE FUTURE INVESTORS REFOCUS ON YIELD By Jeff Kotzen, Tim Nolan, and Frank Plaschke This is the second in a series of online articles published in advance of The Boston Consulting Group
More informationItaly s debt sustainability: stable but with room for improvement through more growth
Focus on Economics Italy s debt sustainability: stable but with room for improvement through more growth No. 198, 1 March 218 Author: Dr Philipp Ehmer, phone +49 69 7431-6197, philipp.ehmer@kfw.de At over
More informationEurozone. EY Eurozone Forecast June 2014
Eurozone EY Eurozone Forecast June 2014 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Luxembourg Malta Netherlands Slovakia Slovenia Spain Outlook for exits bailout,
More informationA Guide to 2016 s Market Volatility. CONGRESS WEALTH MANAGEMENT, LLC 250 Northern Ave, Suite 310, Boston, MA
CONGRESS WEALTH MANAGEMENT, LLC 250 Northern Ave, Suite 310, Boston, MA 02210 www.congresswealth.com Contents What will it take to calm the markets? Will the correction in U.S. stocks turn into a bear
More informationVincent Reinhart on Debt and Growth in the U.S. and Japan By Robert Huebscher June 4, 2013
Vincent Reinhart on Debt and Growth in the U.S. and Japan By Robert Huebscher June 4, 2013 High debt levels translate to slower growth, according to Vincent Reinhart. That conclusion will be disheartening
More informationDangers Ahead? Navigating Hazards Using Scenario Analysis
Aon Hewitt Retirement and Investment Dangers Ahead? Navigating Hazards Using Scenario Analysis Risk. Reinsurance. Human Resources. According to author and political activist, Helen Keller, A bend in the
More informationOVERVIEW. The EU recovery is firming. Table 1: Overview - the winter 2014 forecast Real GDP. Unemployment rate. Inflation. Winter 2014 Winter 2014
OVERVIEW The EU recovery is firming Europe's economic recovery, which began in the second quarter of 2013, is expected to continue spreading across countries and gaining strength while at the same time
More informationA TALE OF TWO CHINESE CONSUMERS
A TALE OF TWO CHINESE CONSUMERS By Jeff Walters and Youchi Kuo Despite the well-publicized slowdown in economic growth, overall consumer sentiment in China can still be described as cautiously optimistic.
More informationCutting debt and deficits
Cutting debt and deficits January 23, 2012 Keith Wade, Schroders Chief Economist James Bilson, Economist How much tightening is needed, how will growth be impacted and who faces the hardest journey? The
More informationGreece. Eurozone rebalancing. EY Eurozone Forecast June Portugal Slovakia Slovenia Spain. Latvia Lithuania Luxembourg Malta Netherlands
EY Forecast June 215 rebalancing recovery Outlook for Delay in agreeing reform agenda has undermined the recovery Published in collaboration with Highlights The immediate economic outlook for continues
More informationEcon 102 Final Exam Name ID Section Number
Econ 102 Final Exam Name ID Section Number 1. Which of the following is not an accurate statement of core capital goods? A) proxy for business investments B) does not include transportation equipment C)
More informationGauging Current Conditions:
Gauging Current Conditions: The Economic Outlook and Its Impact on Workers Compensation Vol. 2 2005 The gauges below indicate the economic outlook for the current year and for 2006 for factors that typically
More informationA short history of debt
A short history of debt In the words of the late Charles Kindleberger, debt/financial crises are a hardy perennial we have been here many times before. Over the past decade and a half the ratio of global
More informationHas US Debt Reached A Tipping Point?
Has US Debt Reached A Tipping Point? October 28, 2016 by Urban Carmel of The Fat Pitch Summary: Investors have become very concerned about excessive debt in the US. The worry is that current leverage has
More informationCHARTS MAY 23, 2017 WASHINGTON, D.C.
CHARTS MAY 23, 2017 WASHINGTON, D.C. Peterson Foundation charts are available online and are free to use without modification for educational and editorial use, with credit to the Peter G. Peterson Foundation
More informationDeficits and Debt: Economic Effects and Other Issues
Deficits and Debt: Economic Effects and Other Issues Grant A. Driessen Analyst in Public Finance February 17, 2016 Congressional Research Service 7-5700 www.crs.gov R44383 Summary The federal government
More informationCutting debt and deficits
Cutting debt and deficits 23 January 2012 Keith Wade, Schroders Chief Economist James Bilson, Economist How much tightening is needed, how will growth be impacted and who faces the hardest journey? The
More informationEurozone. Outlook for. Ernst & Young Eurozone Forecast. Summer edition 2012
Eurozone Ernst & Young Eurozone Forecast Summer edition 2012 Outlook for Published in collaboration with Andy Baldwin Head of Financial Services Europe, Middle East, India and Africa With key national
More informationEurozone. EY Eurozone Forecast March 2015
Eurozone EY Eurozone Forecast March 2015 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Slovakia Slovenia Spain Outlook for Modest
More informationEurozone. EY Eurozone Forecast September 2014
Eurozone EY Eurozone Forecast September 2014 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Outlook for
More informationOn Abenomics and the Japanese Economy. Motoshige Itoh Member, Council on Economic and Fiscal Policy and Professor, University of Tokyo
On Abenomics and the Japanese Economy Motoshige Itoh Member, Council on Economic and Fiscal Policy and Professor, University of Tokyo The purpose of this brief overview is to summarize some of the major
More informationDeficits and Debt: Economic Effects and Other Issues
Deficits and Debt: Economic Effects and Other Issues Grant A. Driessen Analyst in Public Finance November 21, 2017 Congressional Research Service 7-5700 www.crs.gov R44383 Summary The federal government
More informationMoney, Finance and the Real Economy: what went wrong?
Money, Finance and the Real Economy: what went wrong? Anton Brender Rotterdam, December 1, 15 December 15 FIRMS SPENDING BEHAVIOUR RESPONDS LESS TO INTEREST RATES CHANGES Non-financial firms borrowing
More informationIdentifying Banking Crises
Identifying Banking Crises Matthew Baron (Cornell) Emil Verner (Princeton & MIT Sloan) Wei Xiong (Princeton) April 10, 2018 Consequences of banking crises Consequences are severe, according to Reinhart
More informationEurozone Ernst & Young Eurozone Forecast Summer edition June 2011
Eurozone Ernst & Young Eurozone Forecast Summer edition June 2011 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain
More informationGary Shilling - Why You Should Own Bonds
Gary Shilling - Why You Should Own Bonds February 17, 2015 by Robert Huebscher If you followed Gary Shilling s advice for the last 30 years, you would be very wealthy. Shilling runs the New Jersey-based
More informationThe yellow highlighted areas are bear markets with NO recession.
Part 3, Final Report: Major Market Reversal Model This is the third and final report on my major market reversal model. This portion of the model focuses on the domestic and international economy. I ve
More informationInvestment Newsletter September 2012
Licensed by the California Department of Corporations as an Investment Advisor Government policies have always had a significant impact on investors and investments, but the level of intervention in the
More informationLacy Hunt: Keynes was Wrong (and Ricardo was Right)
Lacy Hunt: Keynes was Wrong (and Ricardo was Right) May 4, 2010 by Robert Huebscher Underpinning the Obama administration s economic policies is the work of John Maynard Keynes, the legendary British economist
More informationProgress Towards Strong, Sustainable, and Balanced Growth. Figure 1: Recovery From Financial Crisis (100 = First Quarter of Real GDP contraction)
Progress Towards Strong, Sustainable, and Balanced Growth Figure 1: Recovery From Financial Crisis ( = First Quarter of Real GDP contraction) 13 125 196-26 AE Recessions' Range*** 196-26 AE Recessions**
More informationGUESSING THE TRIGGER POINT FOR A U.S. DEBT CRISIS
No. 10-45 August 2010 working paper GUESSING THE TRIGGER POINT FOR A U.S. DEBT CRISIS By Arnold Kling The ideas presented in this research are the author s and do not represent official positions of the
More information2012 6 http://www.bochk.com 2 3 4 ECONOMIC REVIEW(A Monthly Issue) June, 2012 Economics & Strategic Planning Department http://www.bochk.com An Analysis on the Plunge in Hong Kong s GDP Growth and Prospects
More informationInvestors Look to the Long Term
Investors Look to the Long Term By Jeff Kotzen, Tim Nolan, and Frank Plaschke This is the second in a series of articles published in advance of The Boston Consulting Group s 1 Value Creators report. In
More informationAon Retirement and Investment. Aon Investment Research and Insights. Dangers Ahead? Navigating hazards using scenario analysis.
Aon Retirement and Investment Aon Investment Research and Insights Dangers Ahead? Navigating hazards using scenario analysis March 2018 Table of contents Executive summary....1 Introduction...1 Scenario
More informationHow costly is for Spain to be in the EURO?
How costly is for to be in the EURO? Are members of a monetary Union fatally handicapped to recover from recessions and solve financial crisis? By Domingo Cavallo 1 Countries with a long history of low
More informationStructural Changes in the Maltese Economy
Structural Changes in the Maltese Economy Dr. Aaron George Grech Modelling and Research Department, Central Bank of Malta, Castille Place, Valletta, Malta Email: grechga@centralbankmalta.org Doi:10.5901/mjss.2015.v6n5p423
More informationIN A TOUGH MARKET, INVESTORS SEEK NEW WAYS TO CREATE VALUE
IN A TOUGH MARKET, INVESTORS SEEK NEW WAYS TO CREATE VALUE By Julien Ghesquieres, Jeffrey Kotzen, Tim Nolan, and Hady Farag This article is the second in the 6 BCG Value Creators series. In May 6, we released
More informationAvailable online at ScienceDirect. Procedia Economics and Finance 32 ( 2015 )
Available online at www.sciencedirect.com ScienceDirect Procedia Economics and Finance 32 ( 2015 ) 256 263 Emerging Markets Queries in Finance and Business Quantitative and qualitative analysis of foreign
More informationThe Case for Money Finance:
The Case for Money Finance: An essentially political issue Institute of International and European Affairs Dublin, 26 April 2016 Adair Turner Chairman Institute for New Economic Thinking 300 Park Avenue
More informationEurozone. EY Eurozone Forecast September 2014
Eurozone EY Eurozone Forecast September 214 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Outlook for Slovenia
More informationEcon 102 Final Exam Name ID Section Number
Econ 102 Final Exam Name ID Section Number 1. Assume that the economy is contracting and unemployment is rising. Which of the following would be a logical explanation for a sudden fall in the unemployment
More informationStructural changes in the Maltese economy
Structural changes in the Maltese economy Article published in the Annual Report 2014, pp. 72-76 BOX 4: STRUCTURAL CHANGES IN THE MALTESE ECONOMY 1 Since the global recession that took hold around the
More informationThe Saturday Economist UK Economic Outlook Q1 2015
The Saturday Economist The Saturday Economist UK Economic Outlook Q1 2015 Leisure and Construction driving recovery UK Economic Outlook March 2015 Page 1 The UK recovery continues. We expect growth of
More informationOECD Interim Economic Projections Real GDP 1 Percentage change September 2015 Interim Projections. Outlook
ass Interim Economic Outlook 16 September 2015 Puzzles and uncertainties Global growth prospects have weakened slightly and become less clear in recent months. World trade growth has stagnated and financial
More informationMacroeconomic Outlook November 2015
Macroeconomic Outlook November 2015 Philippe WAECHTER Head of Economic Research My twitter account @phil_waechter or http://twitter.com/phil_waechter My blog http://philippewaechter.en.nam.natixis.com
More informationEurozone. EY Eurozone Forecast March 2014
Eurozone EY Eurozone Forecast March 2014 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Outlook for Germany
More informationUkraine Macroeconomic Situation
In 2012, industrial production was down by 1.8% yoy as weakening global demand for steel exerted a toll on the Ukrainian metallurgical industry. Last year, harvested 46.2 tons of grains and overseas shipments
More informationSession 16. Review Session
Session 16. Review Session The long run [Fundamentals] Output, saving, and investment Money and inflation Economic growth Labor markets The short run [Business cycles] What are the causes business cycles?
More informationEurozone. EY Eurozone Forecast September 2013
Eurozone EY Eurozone Forecast September 213 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Outlook for Greece Rising
More informationCHARTS MAY 10, 2018 WASHINGTON, D.C.
CHARTS MAY 10, 2018 WASHINGTON, D.C. Peterson Foundation charts are available online and are free to use without modification for educational and editorial use, with credit to the Peter G. Peterson Foundation
More informationExecutive Summary. The Transatlantic Economy Annual Survey of Jobs, Trade and Investment between the United States and Europe
The Transatlantic Economy 2011 Annual Survey of Jobs, Trade and Investment between the United States and Europe Daniel S. Hamilton Daniel S. Hamilton and Joseph P. Quinlan and Joseph P. Quinlan Center
More informationGovernment spending in a model where debt effects output gap
MPRA Munich Personal RePEc Archive Government spending in a model where debt effects output gap Peter N Bell University of Victoria 12. April 2012 Online at http://mpra.ub.uni-muenchen.de/38347/ MPRA Paper
More information1 World Economy. Value of Finnish Forest Industry Exports Fell by Almost a Quarter in 2009
1 World Economy The recovery in the world economy that began during 2009 has started to slow since spring 2010 as stocks are replenished and government stimulus packages are gradually brought to an end.
More informationChapter 5. Measuring a Nation s Production and Income. Macroeconomics: Principles, Applications, and Tools NINTH EDITION
Macroeconomics: Principles, Applications, and Tools NINTH EDITION Chapter 5 Measuring a Nation s Production and Income During the recent deep economic downturn, economists, business writers, and politicians
More informationAccelerating Deflation and Monetary Policy
Accelerating Deflation and Monetary Policy Summary Deflation is proceeding at an accelerated pace due to the widening deflationary GDP gap. Eliminating deflation through economic stimulus by increasing
More informationThe U.S. Trade Deficit: A Sign of Good Times. Testimony before The Trade Deficit Review Commission
The U.S. Trade Deficit: A Sign of Good Times Testimony before The Trade Deficit Review Commission Submitted by Daniel T. Griswold Associate Director, Center for Trade Policy Studies Cato Institute August
More informationIrish Economy and Growth Legal Framework for Growth and Jobs High Level Workshop, Sofia
Irish Economy and Growth Legal Framework for Growth and Jobs High Level Workshop, Sofia Diarmaid Smyth, Central Bank of Ireland 18 June 2015 Agenda 1 Background to Irish economic performance 2 Economic
More informationPolicy Alternatives for a Return to Full Employment in Spain
November 2013 Policy Alternatives for a Return to Full Employment in Spain By David Rosnick and Mark Weisbrot * Center for Economic and Policy Research 1611 Connecticut Ave. NW Suite 400 Washington, DC
More informationEurozone. EY Eurozone Forecast March 2015
Eurozone EY Eurozone Forecast March 2015 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Outlook
More informationImpact of Greece Debt Crisis on World Economy
Impact of Greece Debt Crisis on World Economy Kovid Kumar Gupta 1 kovid.gupta@gmail.com Abstract This study aims at exploring the reasons behind the Greece debt crisis that emerged in the 21 st century
More informationThe U.S. Current Account Balance and the Business Cycle
The U.S. Current Account Balance and the Business Cycle Prepared for: Macroeconomic Theory American University Prof. R. Blecker Author: Brian Dew brianwdew@gmail.com November 19, 2015 November 19, 2015
More informationThe Outlook for Israel s Economy in Light of Current Global Developments
The Outlook for Israel s Economy in Light of Current Global Developments Dr. Leonardo Leiderman Professor of Economics, Tel-Aviv University and Chief Economic Advisor, Bank Hapoalim To be presented in
More informationBASE METALS - MONTHLY
June 6, 2011 BASE METALS - MONTHLY Base metal prices ended largely lower on the back of re-emergence of concerns from the Euro-zone, weak economic data and expectation of decline in demand. European debt
More informationGREEK ECONOMIC OUTLOOK
CENTRE OF PLANNING AND ECONOMIC RESEARCH Issue 27, June 2015 GREEK ECONOMIC OUTLOOK Macroeconomic analysis and projections Public finance Human resources and social policies Development policies and sectors
More informationDEFICITS AND DEBT Macroeconomics in Context (Goodwin, et al.)
Chapter 16 DEFICITS AND DEBT Macroeconomics in Context (Goodwin, et al.) Chapter Overview This chapter expands on the material from Chapter 10, from a less theoretical and more applied perspective. It
More informationLyle E. Gramley MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. Conrnunity Leaders in Seattle
For Release ON DELIVERY THURSDAY, SEPTEMBER 11, 1980 12:00 P.D.T. (3:00 P.M. E.D.T.) SUPPLY-SIDE ECONCMICS : ITS ROLE IN CURING INFLATION Remarks by Lyle E. Gramley MEMBER, BOARD OF GOVERNORS OF THE FEDERAL
More informationHow Successful is China s Economic Rebalancing?*
How Successful is China s Economic Rebalancing?* C.P. Chandrasekhar and Jayati Ghosh Over the past decade, there has been much talk of global imbalances, and of the need to correct them in an orderly way.
More informationGlobal Imbalances and the Financial Crisis: Products of Common Causes
179 Commentary Global Imbalances and the Financial Crisis: Products of Common Causes Jacob Frenkel As you indicated, this paper has two discussants, and I m the last one. So, when I saw what Maury presented
More informationIntesa Sanpaolo S.p.A.
Intesa Sanpaolo S.p.A. IRMC 2012 The Unintended Consequences of Re-Regulation Rome, 19 June 2012 Mauro Maccarinelli Head of Market Risk and Financial Valuation Risk Management Group 1 Re-Regulation (1/2)
More informationWhat is the global economic outlook?
The outlook What is the global economic outlook? Paul van den Noord Counselor to the Chief Economist The outlook Real GDP growth, in per cent United States.... Euro area. -. -.. Japan -.... Total OECD....
More informationHow Serious of a Threat Is Global Deflation?
How Serious of a Threat Is Global Deflation? Nariman Behravesh Farid Abolfathi John Mothersole Dan Ryan Todd Lee Howard Archer Global Insight Teleconference December 17, 22 199s: A Deflationary Wave The
More informationFiscal Policy & Colored Animals
Fiscal Policy & Colored Animals Eric M. Leeper Department of Economics, Indiana University September 2010 College of Arts & Sciences Alumni Event The Message If we allow the The Message to distract us
More informationMaking the Eurozone sustainable Paul De Grauwe
index 2000=100 Making the Eurozone sustainable Paul De Grauwe The election of Emmanuel Macron to the French Presidency creates new opportunities for taking initiatives that will ensure, first, that the
More informationEurozone Ernst & Young Eurozone Forecast June 2013
Eurozone Ernst & Young Eurozone Forecast June 2013 Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Ernst & Young
More informationOverview. Stanley Fischer
Overview Stanley Fischer The theme of this conference monetary policy and uncertainty was tackled head-on in Alan Greenspan s opening address yesterday, but after that it was more central in today s paper
More information