1/6 As Powell puts in his recent speech, we are “in a world of slow global growth, low inflation, and low interest rates…" and "fac[ing] heightened risks of lengthy, difficult-to-escape periods in which our policy interest rate is pinned near zero.”
2/6 CF40 member Miao Yanliang mentioned in his book that, under a #fiscal policy framework, the #demographic change and pessimistic anticipation collectively contribute to the world characterized by LOW #inflation, LOW #growth and LOW interest rate.
mp.weixin.qq.com/s/6q8SJ9RHmrKh…
3/6 After the global financial #crisis in 2008, major developed countries faced pressure to reduce #deficits, #debt, and private sector #deleveraging. In this context, the macro-policy has shifted from the former #monetary dominance to #fiscal dominance. #macroeconomics
4/6 Fiscal dominance implies a more independent fiscal policy with monetary policy playing a role of balancing the budget. However, the reality is - monetary policy is ineffective in nowadays. Some reckons the Keynesian-type liquidity trap has been taking place.
5/6 Miao pointed out that the underlying reasons are fear of uncertainty and the pessimistic expectation of the future. Monetary policy not only monetizes debt, but also increases the value of government debt. This is a new development in macroeconomic practices after the crisis.
6/6 Miao thinks the reason behind the pessimism is structural changes of demographic influence - the financial impact of aging and the fading dividend of population growth, with the former includes the shrinking working-age population and the slowdown of the urbanization process.
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