Category Archive: 8) Economics

When Will the Renminbi Become a Reserve Currency?

We recently explained that China will overtake the United States not only for GDP but also for wealth. In this post we explain what is still missing to become a world reserve currency and how quickly this could happen.

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Rational Expectations, Lucas Critique and NAIRU



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Inflation Expectations = Real GDP Growth = Ten-Year Treasury Yields – 0.5%?

Inflation expectations drive the Fed's and markets behaviour. Bond yields adjust, often but not always, with an inflation premium against short-term rates.

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The History of Financial Cycles



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Financial Cycles History, 1991-1998: Overspending in Germany, Asia and former communist countries, Housing Busts in Japan and Northern Europe

In this post we present financial and credit cycles in the history: Due a weak credit cycle, Germany was a weak economy under many other weak ones.

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Financial Cycle 1986-1991: The European and Japanese Asset Price Boom and the End of Communism



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Financial Cycles, the very long-term view



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Business Cycles

The typical backstops of all improvements in business cycles are high oil prices and inflation. Inflation is mostly caused by local effects.

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Rational Expectation, Financial Cycles, Credit Cycles, Joseph Cycles



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Financial Cycles History: 1945-1966: Bretton Woods, strong growth in Europe

The Bretton Woods time from 1945 to 1966 was a period of strong growth, especially in country like Germany, France, Italy and Japan.

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Financial Cycles, 1964-1971: Tiffin Dilemma and Vietnam War



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Financial Cycles History, 1978-1985: Oil Glut, Strong Dollar and the Lost Decade in Latin America

The next financial cycle takes from 1981 to 1990: The dollar was strong, Latin America lost a decade and the Japanese created their bubble.

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Financial Cycles History, 1990-1996: Breakdown of Communism, German Reunification, Housing Busts in Europe and Japan

A history of financial cycles: 1990-1996 the breakdown of communism leads to a boom in Germany and - due to high interest rates and inflation - to a breakdown of the European monetary system.

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Financial Cycles History, 1998-2002: The Dotcom Bubble and Bust and European and Asian Austerity as its Enabler

In this post we present financial and credit cycles in the history: Due a weak credit cycle, Germany was a weak economy under many other weak ones.

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2002-2011: Boom of Emerging Markets and Commodities



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Volckers Attack on Stagflation

In this chapter we describe how Volcker managed to defeat stagflation; he applied the monetarist models that had been applied successfully in Switzerland and Germany. Thanks to this effort, the dollar stopped its secular decline.

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Financial Crises in Comparison, This Time is Different



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Negative Rates for Bundesbank TARGET2 Surplus?

The ECB surprised with negative rates on excess reserves, on the deposit facility and even on TARGET2. We clarify whether the Bundesbank, as a member of the euro system, must pay negative interest rates on its huge TARGET2 surplus.

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Germany: Last European Country with Lots of Cash Under Matresses

In June 2014, the ECB decided to introduce negative rates on the excess reserves of banks. We explain that German banks had already removed most excess liquidity before the ECB meeting of June 2014, and they will continue to do so. Hence hardly any German bank will pay negative rates after the recent ECB decisions at that meeting.

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The trade deficit and the collapse of manufacturing, the causes of the U.S. secular stagnation?



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