The world is gasping for economic growth. Flat or falling populations in much of the developed world has pulled the props out of economic expansion opportunities. This is compounded by a socialism trope that has removed the notion that capitalistic fiscal policies should be used to stimulate things ... like Trump has been effectively using in the US with tax and regulation cuts.
The result of course is that central banks in these countries are being used to try to stimulate their economies ... after all it worked in the US after the financial crisis in 2008-09. This lesson has been followed slavishly until interest rates have gone negative ... even for 30-year German government bonds. Another symptom of this lassitude is in England home buyers can get mortgages wherein only the interest is due monthly. And, in Holland, one can get zero or even negative rate mortgages.
This trend at most of our trading partners ... to ignore fiscal policy and rely on monetary policy for economic growth ... cannot turn out well. Even the US is now being forced to play this monetary stimulus game given that we must compete with the rest of the developed world. American 10-year interest rates have been more than halved in the last year ... yet we are still almost two percentage points above the rest of the big boys.
This pushes up the dollar as other seekers of yield flock to the US ... and a strong dollar hurts our exports ... not that weak economies elsewhere are not also a drag.
The solution: The developed world ... including China ... needs to start focusing on fiscal stimulus and productivity instead of relying on their central banks to hold their economic heads above water. If these Bernanke acolytes don’t change their ways, the world is in for some dark days.
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