Deflation will be the overriding topic when America's Federal Reserve Board meets on June 24th. Michael Woodford, one of the world's leading authorities on central banking, offers a strategy to break the grip of falling prices.
Alan Greenspan's recent speech to a conference of bankers in Berlin--admitting the desirability of "insurance" against the risk of deflation in the US, even if it has not yet appeared--focused attention on a crucial issue. What can be done to stabilize an economy when nominal interest rates cannot be lowered any further, but prices still fall and the output gap--the difference between what it can produce and what it actually does produce--remains wide? What was a theoretical curiosity raised by John Maynard Keynes in the 1930's has become the fundamental issue confronting policymakers in the world's largest economies.
Japan poses the clearest example of this problem. Growth there remains anemic, and deflation lingers, suggesting a need for monetary stimulus. But the benchmark interest rate in Japan has been essentially zero for the past four years, so the standard form of monetary stimulus--reducing short_term nominal interest rates--is unavailable.
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Calls at this year’s Shangri-La Dialogue in Singapore to improve military-to-military communication between the US and China, especially in light of increasingly aggressive encounters at sea and in the air, fell on deaf ears. Despite the best efforts of the US and its allies, China is in no hurry to re-engage.
considers the implications of the complete collapse of defense diplomacy between the US and China.
To think that technology will save us from climate change is to invite riskier behavior, or moral hazard. Whether a climate solution creates new problems has little to do with the solution, and everything to do with us.
offers lessons for navigating a field that is fraught with hype, unintended consequences, and other pitfalls.
Deflation will be the overriding topic when America's Federal Reserve Board meets on June 24th. Michael Woodford, one of the world's leading authorities on central banking, offers a strategy to break the grip of falling prices.
Alan Greenspan's recent speech to a conference of bankers in Berlin--admitting the desirability of "insurance" against the risk of deflation in the US, even if it has not yet appeared--focused attention on a crucial issue. What can be done to stabilize an economy when nominal interest rates cannot be lowered any further, but prices still fall and the output gap--the difference between what it can produce and what it actually does produce--remains wide? What was a theoretical curiosity raised by John Maynard Keynes in the 1930's has become the fundamental issue confronting policymakers in the world's largest economies.
Japan poses the clearest example of this problem. Growth there remains anemic, and deflation lingers, suggesting a need for monetary stimulus. But the benchmark interest rate in Japan has been essentially zero for the past four years, so the standard form of monetary stimulus--reducing short_term nominal interest rates--is unavailable.
To continue reading, register now.
Subscribe now for unlimited access to everything PS has to offer.
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