Project Syndicate - 24 Jul 2017
PIMCO’s global strategist ponders why investors in risky asset markets are so complacent while bond investors are waving red flags. In his opinion, when cross-asset market volatility is low, de-risking is prudent. He sees two reasons to worry as an investor: (1) to the extent that the gap between trend growth and natural rates drives up asset valuations, marginal changes in that gap should lead to changes in those valuations; (2) higher valuations do not necessarily mean higher returns or better volatility-adjusted returns. A bit technical at times but worth reading (in 6-8 min).
Published in Weekly selection 28 July 2017
Project Syndicate - 31 Jan 2017
2017 may be the first year in a decade with no advanced economy experiencing deflation. Possibly, the long-awaited effects of the historic monetary expansion are finally yielding fruit, but most likely, currency depreciation in the UK, Japan, and the Eurozone has been a catalyst. Central banks will tolerate, if not encourage, a bit of inflation: it will help to erode the mountains of debt that advanced economies have built up in the past 15 years or so (reads in 3-5 min).
Published in Weekly selection 3 February 2017
Project Syndicate - 5 Feb 2016
The author of “Between Debt and the Devil” explains why negative interest rates (or an expansion of QE) will not offset the strong deflationary forces engulfing Japan. Central banks and governments together never run out of policy ammunition to offset deflation, because they can always finance tax cuts or increase public expenditure with printed money. This is what he recommends that the Japanese authorities should do: permanently writing off some of the BOJ’s huge holdings of Japanese government bonds and canceling the planned sales-tax increase. (reads in about 10 mn)
Published in Weekly selection 12 February 2016