"History, real solemn history, I cannot be interested in.... I read it a little as a duty; but it tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars and pestilences in every page; the men all so good for nothing, and hardly any women at all - it is very tiresome." Jane Austen spoken by Catherine Morland in 'Northanger Abbey'
Readers here know that I have been tracking "Real" Canadian interest rates and most of the time since the Pit of Gloom in March 2009, the real bank rate of Canada has been negative and yet total CPI since 2011 has been in a down trend except for the 2013-2014 spike with the oil rally which has rolled over.
The Eurozone central bank nominal negative rate experiment started in June 2014 but is getting panned by the private sector. Supply side lending is not producing private sector demand for borrowing. Borrowers get quickly fatigued when prices are not rising, and without price inflation, aggregate demand drops and economic growth stalls.
Banks are not sitting on piles of unloaned money, they are unable to find credit worthy borrowers that have desire.
It's a myth that banks lend their reserves in some money multiplier style fashion and that the Central Bank can control the rate of inflation directly by steering the banks to act in precise ways. Hat Tip to Cullen Roche
THE EUROZONE CONTINUES TO DEFLATE
AS CHINESE HOUSING GRINDS LOWER
When it comes to net worth, what the stock market is to the US, housing is to China. Hat Tip to Zero Hedge
When the world is suffering from insufficient demand, however, clearly the problem we face today, income inequality and excess savings are the problem, not the solution. There may be plenty of good investments that are not being funded in the US, but the reason they suffer from lack of funding, unlike in the 19th Century, is not because capital is to scarce or too expensive. Capital is actually too plentiful, and this shows up in the speculative flows that have driven global stock and bond markets to unreasonable levels. It is weak demand or political gridlock that prevents productive investments from being made. Hat Tip to Michael Pettis
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense