Tags: Roubini | policy | deflation | stimulus

Roubini: 'We Live in World' With 'Too Much Supply, Too Little Demand'

By    |   Tuesday, 03 February 2015 12:16 PM

Central banks around the globe have been easing big-time since the financial crisis of 2008. So why is economic growth so sluggish in so many countries?

"Simply put, we live in a world in which there is too much supply and too little demand," star economist Nouriel Roubini of New York University writes in an article for Project Syndicate. "The result is persistent disinflationary, if not deflationary, pressure, despite aggressive monetary easing."

Eurozone consumer prices fell 0.6 percent in the year through January. And the U.S. personal consumption expenditures price index, the Federal Reserve's favored inflation measure, climbed only 0.7 percent last year.

"The inability of unconventional monetary policies to prevent outright deflation partly reflects the fact that such policies seek to weaken the currency, thereby improving net exports and increasing inflation," Roubini explains.

"This, however, is a zero-sum game that merely exports deflation and recession to other economies."

The fact that monetary stimulus is accompanied by some degree of fiscal austerity in many countries, including the United States and Europe, also is a problem. "To be effective, monetary stimulus needs to be accompanied by temporary fiscal stimulus," Roubini writes

"All of this adds up to a recipe for continued slow growth, secular stagnation, disinflation, and even deflation. That is why, in the absence of appropriate fiscal policies to address insufficient aggregate demand, unconventional monetary policies will remain a central feature of the macroeconomic landscape."

Others are concerned about currency war too.

"For those countries that are engaging in this currency war, they have exhausted all the policy tools they have," David Woo, head of currency research at Bank of America, tells The Wall Street Journal.

Many experts expect the greenback, which hit an 11-year high against the euro last week and a seven-year high against the yen in December, to keep rising.

"This is a multiyear dollar rally, and we're at the start of it," Stephen Jen, co-founder of investment firm SLJ Macro Partners, tells The Journal.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Finance
Central banks around the globe have been easing big-time since the financial crisis of 2008. So why is economic growth so sluggish in so many countries?
Roubini, policy, deflation, stimulus
330
2015-16-03
Tuesday, 03 February 2015 12:16 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved