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00:00:05hello and welcome to demand-side economics I am Ellen Harvey and this is a demand-side relay that came out easy for Wednesday March 19th 2014 things are popping at my new gig as director of idea economics check it out at idea economics. Org get on the mailing list for the email explanations coming out over the next week by giving me your address email address at demand-side at live.com
00:00:38the mission of idea economics is to reform economics to rescue the society from Bad economics we don't do it without you there is no example of an economics reforming itself from within of the scholarly debate leading to a more coherent theory and practice the only successful reform was the revolution of the 1930s when the economy fell apart and the pendants were rejected out of hand people looked around saw it was not working so call a profession that claimed it was working and just needed more time
00:01:20felt the rise of stalinism and Hitler and looked for an alternative the alternative was it hand with canes and intuitive with the New Deal
00:01:33this is the place you and I find ourselves needing to prepare the alternative in our case in the modern world it must be a widespread understanding of how things actually work confirmed by how it lets us make sense and predict the material is not difficult endogenous money Dynamic process demand trumping Supply it may sound daunting but anybody with a high school education can get the basics
00:02:06it becomes more difficult actually the more you have to unlearn those who are now coming to the field and I have not had that the nonsense inculcated in them are a step or several ahead of those who are trained when the time comes and it is already upon us when people look around for the alternative it has to be at hand in people's understanding it cannot be off at idea or inet or even one or another national government policy office that is not the way the modern interconnected chaotic World works
00:02:46even what progress has been made in the academic debate today has been done only because of the exigencies of History what is being done is not working monetary policy was going to save the day in 08 the FED will do whatever it takes was the calm Assurance the FED did whatever but it didn't take the biggest transfer of wealth do we already wealthy in history took place in a trillion dollar per year by up of financial assets took place but it yielded only a buoyant market and a recovery air quote it is a matter of statistical semantics
00:03:26stagnation instability social unrest continue and increase we in the United States are in fact somewhat insulated not by good economics could buy our dollar being the favorite the currency of the moment
00:03:43so today's podcast is a test without interruption we bring you the relay of a Bloomberg interview of snp's Chief Global Economist Paul Sheard today's test why is the sky wrong except on 3 narrow points
00:04:04pushard is a leading that Operation Paul shirt is there Chief Economist of course with the years in Japan watch for Lehman Brothers and others paw good morning how important was his speech by bladimir Putin within the geopolitics in the gioi economics that you cover
00:04:25well obviously Tom the developments in the in the Ukraine and Crimea in particular to the moment it's very hard to say how that's all going to play out but we are really see it at the moment so moving the dial I'm moving the needle on a global growth out and put me on something to have that surgery recovery postponed not cancelled can you say the same about Europe in particular Germany and East can that be a recovery canceled the Eurozone would have to I really seriously spin out of control from here when looking for Recovery in the Eurozone expansion of a roundabout 1%
00:05:25little bit more next year. Still would leave the level of GDP I just barely getting back to where it was before the financial crisis so I recover it does appear to be on the way by Germany but the perfumes destabilized and I should edge up a little bit this year or next as well there's been a week consensus that's been wrong wrong wrong for 18 months 139 29 on a daily basis and new Strength is 140 critical is it 1:40 to work begins to change the story of things like that exchange rate
00:06:24a little bit. Indicating some concern about the depressions of the year the Year of putting on night inflation which is down with to an uncomfortable position and he Phoebe has really been the lack of among the major central banks so you know it's a possibility I think that she be done come out swinging at some point but it will be with a delayed reaction how they do have that little bit longer to get to a point in the United States I mean I mean during today's meeting and the news conference and all that that it will be a non-event do you buy that idea
00:07:08upon at the moment with the 10 billion dollar to a meeting that paper that should continue to let the focus on here but the key I would I think for this meeting Tom is going to be full of guidance the fan. I think it's quite likely at this meeting to make him refinements to It Forward guidance around the federal funds rate the saying close to zero in a little bit of an uncomfortable that no man's land at the moment having put in the December statement that kind of place marker 0 for a considerable time will pass the time with the wording they used that the unemployment rate declined glow sticks to have to send
00:08:08you better go back to something a little bit more like a calendar for guidance and shared folks macroeconomic advisers in St Louis has a run rate of this quarter GDP of 1.5% I Am I Wrong Paul I've never heard of a central bank that goes restrictive on a sub 2% economy restricted to that which is being prolonged and very harsh and has definitely put it into him that economic activity I think the FED will will tend to look through that I look at the trend in the economy and the train does look at look pretty good to take me one factor that much more beneficial
00:09:08you guys say there's no inflation when John Tucker says forget about it I feel it at the grocery store so glad inflation that caught looking at an overall index which that puts together another day in the US it would be that the personal consumer expenditure everything's in that Buy electronics computers a lot of mobile phone said that the potential maybe going down and I don't know for the Nets out to be interesting that thing as being that actually overall inflation when you add it all together wearing Lilo in the last few months in Europe
00:10:08Philadelphia Place Urlacher Richmond Fisher Texas and many others listen
00:10:14which explain why the Hawks are worried about inflation if I'm seeing a core CPI of 1.6% that that would have been a Victory lap over the last 30 years wouldn't
00:10:26I need to make sure that the FED targets is actually lower than that the year the PC is down at 1.1% is the context the quantitative easing of the FED has done now obviously they've been doing it in the in response to the financial crisis in the Great Recession.. If it has a cold expand its balance sheet dramatically it's now about 360% a bigger than it was at the time of the financial crisis not normally a central bank doesn't really expand its balance sheet very much maybe 3 4 5. That's the kind of an idea. I think a lot of people having their head that way it's not quite that simple can actually when the time comes that drain or withdrawal that liquidity from the system without triggering inflation and I think people would I'm on monetarist background that thing that they worry about most
00:11:26liquidity ultimately going to go to and including under-inflation Chicago monetarism Bill pool at St Louis fed identified with that theory it was maybe refuted debunked whatever you want to call it 20 years ago is it back or is it amended expanded balance sheet acquiring assets financed by creating reserves in the banking system and those reserved would not automatically multiply into massive credit creation the way the hotel the story at the end of the day at Tom you really do need them on for funds the bank's being
00:12:26and leveraging cycle. Since the Great Depression this is being hydration obviously when people have not been rushing to the bank to borrow money demand for funds and if we take out the plutocracy of huge corporations making huge profits and building up huge cash levels and they can borrow money at 1% or whatever the absurdly yield is everybody else that implies they have no demand
00:12:56correct this is really being a secular. Love in a 5 or 6 years where the private sector households and corporates and Piggly in his country your household I've been rebuilding that down in sheets after credit be sleeping trying to rebuild a net savings and that means that somebody have to I'll set that an absorbent fading so that's really the only two places the rest of the world UF improving current account deficit borrowing left from the rest of the world and it's done that but the other party is the government that's really being the driving force behind at a budget deficits in the last few years but he is after the crisis somebody had to go out and borrow money because the private sector didn't want to do that in place when people share this with you you must speak on Japan and her final minutes ball abenomics is it working
00:13:51it is working and pick me at the bank of Japan the major major shift I really went from under the previous, not know we kind of know we won't and deflation to yes we can yes we will and that's off to a good start but the jury is still out. Particularly because we're just about to go into this fiscal tightening at episode in Japan with the consumption tax coming up in April so the bank of Japan may have to put his foot one more time on the accelerator to really make sure that to other people if he doesn't job in lifting US economy out of what is being a 15 to 20 year. D places is there a level that makes abenomics work when you plug in your Excel spreadsheet where is that young level that allows mr. Ave to change Japan
00:14:48I think it's probably time to put a number on it but I think it's probably a little bit lower than it is at the moment the end did go to about 75 to the dollar and then come all the way back to 100. But at this level it probably needs one more push I guess I'm more planning on me and accelerator and and getting that Yen level down 110 115 baby is it is you think I arranged to have in mind I wish I could be the same one as you are about to have a currency moving that sells problems Paul Sherry thank you so much
00:15:23answers to the test coming in history
00:15:27says Ellen Harvey from me the man side and idea economics. Org

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