Sweden's Central Bank just cut its repo rate to - 25 bps a few hours back. Switzerland, Germany, Denmark, France have followed the US bond market into negative yield territory(though today the US yields are themselves all in positive territory due to the US Fed's predilections).
So what does this imply to policy makers ? What are the action points, plans and key takeaways that a Policy maker in key deflation embroiled countries like those mentioned above need to chalk out to get their economies out of the current imbroglio?
Sadly when this question is asked , the immediate reaction is to think about Central Banks and monetary policy. But today's questions have to be answered by a totally different set of policy makers- Public economists and Law makers of various deflation stuck nations as to why they are frozen into insipidity when it is vey clear that in a deflationary environment private sector spending collapses and with negative yields supporting sovereign borrowing with beneficial fiscal spinoffs , the need of the hour is to sharply expand public investment in infrastructure,research and education. The answer is obvious-in the face of collapsing private sector demand only public sector demand can galvanize a deflating economy back to a modicum of health.
So why is this not happening? I do not know of any printable explanation. What explanation I do have is in unprintable language. Go figure.
No comments:
Post a Comment