Bardonomics

Image: YP Of the many stress-inducing questions facing investors and economists these days, one looms particularly large: when are central banks going to raise interest rates? Attempting to predict anything related to the economy is a rather perilous task – the late Nobel laureate Paul Samuelson once quipped that “markets have predicted nine out of the last five recessions.” Prediction has been a particularly hapless endeavour with post-crisis interest rates. Pundits forecasting an inevitable rates increase have seen themselves embarrassed repeatedly. So why are interest rates near zero per cent anyway? In response to the global economic crisis, central banks around the world, particularly in developed countries, slashed interest rates to record low levels. Cutting interest rates is the standard response to an economic contraction. For maximum effect, these interest rate cuts were combined with a series of monetary policies collectively known as quantitative easing.  Th...

http://www.economist.com/news/special-report/21707833-consensus-favour-open-economies-cracking-says-john-osullivan With protectionist and isolationist sentiments rising around the world, this week's special report on globalization by The Economist is timely and well worth a read. Yes, globalization has left many behind, particularly those working in the manufacturing sector of wealthy Western nations. A growing body of research shows that for those who lose their jobs to trade, the negative effect can persist for a lifetime. The benefits of trade are often more diffuse and felt less ac utely. Yet, in the aggregate, a decrease in prices, increase in consumer choice, and gains in efficiency more than compensate. Indeed, as the report notes, it is the poor, not the rich, who stand to lose the most purchasing power when borders are closed. The report also suggests that much-maligned economic migrants don't compete with native workers so much as they complement them. ...