Thread by @ChinaFinance40

Recently, the global #interestrate has become the focus of market attention again, quoted CF40 member Peng Wensheng.

There are three perspectives for understanding low interest rates. The first is to analyze natural interest rates. Insufficient long-term demand will cause interest rates to fall.

The second is to analyze currency interest rates. The financial cycle leads to a downward trend in interest rates that is oriented towards stable economic cycle.

The third is to analyze risk-free interest rate, insufficient supply of safe asset has brought down risk-free interest rates and up risk premium.
#Safeassets are creditor’s assets, insensitive to information.

The shortage of global safe assets is jointly caused by the factors of trend, structure and short-term uncertainty, which is also confirmed in the data.

To cope with the shortage of safe assets, the central bank should increase its holdings of risk assets to stabilize the economy. At the same time, it should pay attention to the impact of the shortage of safe assets on the global economy.

For China, fiscal policy should play a greater role, and the central bank should expand or at least stop shrinking the balance sheet. In addition, the central bank should increase risk assets, rather than buying government bonds during the balance sheet expansion.