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Showing posts from July, 2019

Yield curve weirdness

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Yield curves have gone mad. Negative yields are everywhere, from AAA-rated government bonds to corporate junk. Most developed countries have inverted yield curves, and a fair few developing countries do too:


(chart from worldgovernmentbonds.com)

Negative yields and widespread yield curve inversion, particularly though not exclusively on safe assets. To (mis)quote a famous pink blog, this is nuts, but everyone is pretending there will be no crash.

Here, for your enjoyment, is an à la carte selection of the most lunatic government yield curves. You can find lots more here.

Exhibit 1: Switzerland.

Negative yield already extends beyond 30 years, and markets are pricing in further interest rate cuts and/or QE, or indeed anything to stop the Swiss franc appreciating as scared investors pile into CHF-denominated assets. Hence the curve inversion.


Exhibit 2: Denmark.

Every Danish government bond currently circulating in the market is trading at a negative yield. And the inverted curve tells us t…

The Case for People's Quantitative Easing

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Last night, the Resolution Foundation hosted a debate to launch my book, "The Case for People's Quantitative Easing". A great panel consisting of Jagjit Chadha, Director of NIESR; Fran Boait, Executive Director of Positive Money; and James Smith, Research Director of the Resolution Foundation, debated my ideas with immense verve, ably moderated by Torsten Bell, Chief Executive of the Resolution Foundation. You can watch the debate here.

In 2008, QE did a great job of supporting asset prices and preventing the disastrous deflationary spiral of the 1930s. But since then, enormous quantities of asset purchases by central banks around the world have proved unable to raise aggregate demand and kickstart growth.

Although central banks didn't do a bad job in the last recession, many of the tools they used won't work in the next one, not least because the legacy of the tools themselves has not yet dissipated. Interest rates are on the floor, central bank balance sheets …