那提西银行-全球-经济理论-经济政策像已经倒退了20年-20180320-7页_854kb

Flash Economics Summary

Core Content

The document titled Flash Economics (20 March 2018) discusses the regression of economic policies in the United States and the euro zone, comparing them to the lessons learned from past economic crises. It highlights how current fiscal and monetary policies are deviating from the best practices established over decades, potentially leading to economic instability.

Main Views

1. Fiscal Policy: Expansionary Despite Full Employment

• United States: The Trump administration pursued stimulatory fiscal policy despite the country being close to full employment, which may not be effective and could worsen trade deficits and public debt.
• Japan: The Abe government implemented fiscal stimulus even though Japan's employment rate is at a record low, suggesting a misalignment with economic conditions.
• Euro Zone (excluding Germany): Expansionary fiscal policy continues despite companies facing significant hiring challenges, indicating a lack of policy sensitivity to supply-side constraints.

The document argues that fiscal stimulus at full employment is likely to lead to minimal positive effects on economic activity and could result in increased public debt and higher interest rates. It references the 1970-1980s experience where such policies exacerbated issues during supply-side shocks.

2. Monetary Policy: No Longer Pre-emptive

• Central banks have historically adopted pre-emptive measures to address inflation and financial imbalances before they became severe.
• However, current practices show a delay in normalizing monetary policy, with central banks waiting until the economy is at full employment before tightening.
• This delay has led to an environment of low interest rates and abundant liquidity, which may now be irreversible.

The loss of pre-emptiveness in monetary policy increases the risk of financial imbalances, as central banks are not acting early enough to prevent asset price bubbles or overborrowing. The document warns that increasing interest rates in this context could lead to significant capital losses for bondholders.

3. Irreversible Situations Created by Monetary Policies

• Low Interest Rates: A prolonged period of very low long-term interest rates has created a situation where raising rates would have severe negative impacts on both borrowers and lenders.
• Bond Portfolios: The average yield on bond portfolios is very low, making any increase in interest rates potentially harmful.
• Liquidity Stock: The large amount of liquidity created by central banks over the past decade will take a long time to reduce, affecting interest rates and asset prices.

The document suggests that OECD countries will have to live with these abnormal conditions for an extended period, which could lead to long-term economic challenges.

Key Information

• Fiscal Deficits: High fiscal deficits are observed in the U.S., Japan, and the euro zone (excluding Germany), despite favorable economic conditions.
• Unemployment Rates: Unemployment is low in the U.S. and Japan, while the euro zone (excluding Germany) shows hiring difficulties.
• Interest Rates: Long-term interest rates have remained very low for a long time, leading to potential capital losses if rates rise.
• Asset Prices: Stock and housing markets have been affected by the prolonged period of low interest rates and abundant liquidity.
• Policy Irreversibility: The current monetary policy environment may not be reversible, creating long-term risks for economies.

Conclusion

The document concludes that the lessons from past economic shocks, which emphasized caution and pre-emptive measures, have been largely forgotten. It warns that the current expansionary fiscal policies and delayed monetary tightening could lead to economic instability and negative outcomes.

Disclaimer

• The document is intended for professional and qualified investors only.
• It is strictly confidential and cannot be disclosed to third parties without prior written consent from Natixis.
• It does not constitute a personalized investment recommendation and is not a financial analysis.
• No liability is accepted for the distribution, possession, or delivery of the document in certain jurisdictions.
• The views expressed are those of the authors and may differ from one another.
• The document is not approved, licensed, or registered by any regulatory body or governmental agency in the GCC or Lebanon.

Regulatory Information

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