Janet Yellen considers her last act
Janet Yellen has done what was needed to leave behind fond memories of her term as Fed chief. She waited until the U.S. economy showed vigorous signs of recovery before announcing a soft-landing solution from the excessive liquidity inherited from Ben Bernanke. In part, this was a conscious choice to do what markets expected. But it may have been governed more by a long-term pessimism about the outlook for the economy.
GIS Dossier: Shinzo Abe’s Japan
Shinzo Abe is not popular, but this consummate political insider has become just the second prime minister in Japan’s history to win three general elections. He managed this feat by skillfully juggling factions in the dominant Liberal Democratic Party, stirring life into Japan’s stagnant economy, and pledging vigorous leadership in the face of a nuclear-armed Korea. Can Mr. Abe turn around a country widely seen to be in irreversible decline?
The Swiss franc 2.0
The Swiss economy is doing remarkably well. Though it is growing only slowly, its companies are competitive, unemployment is virtually absent, inflation is close to zero and public debt is under control. One would therefore expect the Swiss National Bank to abstain from taking an active role in monetary policy or manipulating interest rates and exchange rates. Yet, last June the SNB announced that it intends to play an active role, and that it will expand its money supply to enhance growth and avoid deflation. These explanations are not convincing – the key is somewhere else: bruised Swiss manufacturers.
Shinzo Abe’s underappreciated recovery
Prime Minister Shinzo Abe appears to have made good on his promise to pull Japan out of deflation and slow growth. A large part of the credit goes to the central bank, which stepped in with aggressive bond-buying. But equally crucial has been the role of middle-aged women, who are reentering the job market in droves.
Opinion: Conventional measures give false reassurance on global risk
Conventional measures could be the wrong ones to gauge the risk of a financial shock to the global economy. Imbalances created by cheap money are building up in the economy. A close look at market capitalization, share buybacks, and interest-rate spreads presents a troubling picture.
GIS Dossier: Modi’s India
Prime Minister Narendra Modi has harnessed identity politics to shake up India’s inefficient economy and turn it into a global player. At home and abroad, he has proved an adept operator. Geopolitically, Mr. Modi’s most important move is an increasingly obvious realignment with the U.S., as part of a long-term strategy to counter China’s bid for hegemony in Asia.
Opinion: Confusing statements on money and trade
Janet Yellen is not worried about another global financial crisis. Mario Draghi and even Warren Buffet bemoan “inequality.” But no one seems to be taking seriously the problems artificially cheap money is causing to the global economy. With such a fragile global financial situation, free trade could be a big help – but protectionism is on the rise. Could the upcoming G20 meeting bring substantive progress on that count?
The Federal Reserve’s exit from quantitative easing
The question is not whether but when the U.S. Federal Reserve will start to shrink its bloated balance sheet. Just as quantitative easing was a departure from conventional monetary policy, its withdrawal will be a massive economic experiment. Unintended consequences are to be expected.
Opinion: The day Europe goes bankrupt
You may not be able to see it, but Europe’s biggest economies have piled up enormous amounts of pension debt. The European Central Bank’s policy of target credits and quantitative easing has only made things worse. With politicians seemingly determined not to notice, a systemic implosion may be inevitable.
Fed seeks cover in ‘natural’ interest rate
Last summer, commentators began predicting that U.S. monetary policy would no longer aim to avoid deflation and boost growth, but to keep market interest rates close to what economists call the 'natural' rate. The reasoning behind this argument – publicly voiced by Fed Vice Chairman Stanley Fischer, among others – is puzzling. That may be deliberate, as the Fed has plenty of reasons to want a free hand in coming months.