NATO says it intercepted 19 Russian aircraft

30-Oct (Washington Post) — NATO said Wednesday that it had intercepted a large number of Russian aircraft flying close to European airspace in the past two days, in an “unusual” series of incidents that brought Russian bombers as far afield as Portugal.

The aircraft — at least 19 in all — offered reminders of Russian air power at a time of the worst relations between the West and Russia since the Cold War. Russian military aircraft have significantly increased their activity in Europe since the conflict in Ukraine began earlier this year, with NATO scrambling to intercept aircraft more than 100 times in 2014. But a NATO official said the scale of the latest incidents was the most provocative this year.

Over the Atlantic Ocean and the North, Black and Baltic seas, Russian bombers, fighter jets and tanker aircraft were detected flying in international airspace, NATO said. There were no incursions into national airspace, a violation of sovereignty that would have significantly amplified the seriousness of the four incidents, three of which took place on Wednesday.


PG View: Amid all the market hubbub, let’s not forget that there are still rather substantial geopolitical risks afoot as well.

Posted in Geopolitical Risks |

What Greenspan’s Latest Talk Means for Gold

31-Oct (Sprott) — Greenspan ran the Fed from 1987 to 2006. He ran it right through the great technology bubble in the late 90’s and up to the housing bubble. He is widely accused of voluntarily inflating these asset bubbles through excessive money printing and ‘easy money.’

He’s also viewed as a big-government sell-out because he began his career as an adherent to the economic philosophy of Ayn Rand, with minimal government interference, and, relevant to his role as director of the Fed, sound money.

So what happened to the young ideologue that Greenspan had been? Did power corrupt him? Did he fold under pressure to run the printing presses, debasing the currency and propping up the government?

…Greenspan claims he has always remained true to Austrian economics and the principle of sound money. He fell into his role as Fed Chairman purely by accident, he claimed, and what he did there, he did it because he had to.

He explained that the capital needs of the Federal government were so massive that the only way to prevent disaster for the rest of the economy was to keep feeding the beast with cheap money. If the Fed hadn’t created and circulated new money, the Treasury’s insatiable demand for capital would certainly have ‘crowded out’ the rest of the economy, wrecking the entire private credit system.

Political realities, he explained, in the form of entitlement spending and off-balance sheet obligations of the US government, trump the need for sound money every time. It wasn’t his fault – that’s just how the system works. It’s set up to redistribute income from savers, who lose income because of low interest rates, to spenders.

…We did get one striking admission out of Greenspan. The Fed is not independent of the government, he said, calling suggestions to the contrary ‘naïve.’

…Here’s what the former Fed Chairman had to say about the direction of gold and interest rates:

Gold – measurably higher. Interest rates – measurably higher.”

The Fed isn’t just dangerous because it serves the banking system; it also has another fatal flaw – hubris.


Posted in Central Banks, Gold News, Gold Views, Monetary Policy |

Fed Launches First Currency War Salvo, Tells ECB Not To Push Too Far

31-Oct (ZeroHedge) — Now that The Fed is (however briefly) out of the money-printing business, it appears to have turned its attention to the rest of the world’s “despicable monetary policy” actions and fired what seems to be the first warning shot of ‘currency wars 2.0′, as MarketNews reports:


One wonders how long before Jack Lew also proclaims Japan a ‘currency manipulator’ (and, gasp, the Eurozone) especially after Germany’s Wolfgang Schaeuble reminded the world this morning that “growth can’t be helped by printing money.” You don’t say…


PG View: I wonder how long it will take the Fed to notice that the BoJ is tanking the yen?

Posted in Central Banks, Currency Wars, Monetary Policy, QE |

The Daily Market Report: Gold Falls On Rising Dollar as BoJ Further Debases Yen

31-Oct (USAGOLD) — Gold tumbled through support at 1182.10/1179.83 to establish new four-year lows as the Bank of Japan (BoJ) announced that it would further expand asset purchases in its seemingly unending fight against deflation. The yen tumbled, providing an additional lift to the dollar; which in turn weighed on gold.

In a surprise move, the BoJ said it was escalating its expansion of the monetary base from ¥60-70 trillion per year to ¥80 trillion per year. The BoJ board gave Governor Kuroda one year to defeat deflation, and he went ‘BIG’ in his attempt to do just that, unleashing a torrent of liquidity into the market.

However, with just five-months to go before they need to show results, the BoJ’s QQE program and Abenomics as a whole appear poised to fail. All they can do at this point is further debase the yen and buy ever-more assets. I shudder to think what they might do if this latest boost proves insufficient as well.

Stocks not surprisingly love the idea of an even bigger influx of liquidity, even as the Fed officially completed the taper this week. An article from The Economist today, suggests the U.S. might be strong enough to withstand further yen debasement (dollar strength), but they wonder about Europe…

The European economy is already on the ropes, facing significant growth risks, high unemployment and deflationary pressures. If the Japanese gain further competitive advantage via the weak yen, it could derail any hope for a European recovery.

The ECB announces policy next week and Mario Draghi is going to have to step-up his game. He wants a weaker euro as well, but the Japanese are just being bolder on that front. Will Draghi finally take the plunge into full-fledged QE on Thursday? Probably not, but I anticipate Draghi will rattle the QE saber even louder. The currency wars have escalated once again.

If weakness in the yen and euro continue push the dollar higher, I suspect the Fed will have to do something the give the dollar bulls pause. That too will likely be more jawboning at first, but if that fails, more QE could certainly be in the offing.

UPDATE: MNI cited European central bank sources today as saying that the Fed has noticed the euro’s slide and the ECB “must not push too far.” The ECB sources reportedly also said that a €3 trillion balance sheet is “not in cards”. I wonder how low it will take for the Fed to notice that the yen is cratering?

Most of the price pressure in gold is coming courtesy of ETP outflows. Meanwhile, as we’ve noted in recent weeks, physical demand — particularly in Asia — remains very strong. I suspect the demand for physical gold will be even stronger with the latest price drop.

Posted in Daily Market Report, Gold News, Gold Views |

University of Michigan sentiment (final) rose to 86.9 in Oct, above expectations of 86.4, vs 86.4 previously and 84.6 in Sep.

Posted in Economic Data |

Chicago PMI jumped to 66.2 in Oct, well above expectations of 60.5, vs 60.5 in Sep.

Posted in Economic Data |

Gold hits levels not seen since 2010 as BOJ move rallies dollar

31-Oct (MarketWatch) — Gold continued to tumble on Friday, trading at levels not seen since 2010, as the dollar surged in the wake of a surprise stimulus move from the Bank of Japan.

At last check, gold for December delivery GCZ4, -3.00% slumped $23.80, or 2%, to $1,174.70 an ounce. December silver SIZ4, -3.56% gave up a 36 cents to $16.06 an ounce.

A more hawkish-than expected U.S. Federal Reserve statement has already been weighing on gold this week. The Fed‘s official ending of its bond-buying stimulus program on Wednesday smacked prices hard, as gold shed 2.2% amid signs of a healing economy. The U.S. economy expanded 3.5% in the third quarter, data showed Thursday.

Overnight, the Bank of Japan shocked markets with a move to expand the pace of quantitative easing, triggering a 5% surge in the Nikkei 225 index NIK, +4.83% The dollar USDJPY, +2.52% touched its highest level against the yen since January 2008.


Posted in Gold News, Gold Views |

A trillion here, a trillion there…

31-Oct (Economist) — If the markets were suffering from withdrawal symptoms after the Fed’s halting of QE on Wednesday, they did not have to wait long for their next hit. This morning, the Bank of Japan today announced an increase in its annual target for expansion of the monetary base from ¥60-70 trillion to ¥80 trillion. Even at ¥110 to the dollar, that is still a chunky $700 billion a year increase (or about 2% of GDP). The aim is to get inflation higher; if the recent sales tax increase is excluded, core inflation is still running at 1%, too close to deflation for comfort.

…But perhaps the most interesting response has been in the currency markets, where the yen dropped more than 2% against the dollar, a big move by normal standards. There is now a genuine divergence between monetary policy in the developed economies. That creates a lot more scope for currency volatility than in the long years when virtually all banks had their feet on the monetary accelerator.


PG View: The currency wars escalate once again…

Posted in Central Banks, Currency Wars, Monetary Policy, QE |

Japan’s central bank shocks markets with more easing as inflation slows

31-Oct (Globe&Mail) — The Bank of Japan shocked global financial markets on Friday by expanding its massive stimulus spending in a stark admission that economic growth and inflation have not picked up as much as expected after a sales tax hike in April.

BOJ Governor Haruhiko Kuroda portrayed the board’s tightly-split decision to buy more assets as a pre-emptive strike to keep policy on track, rather than an admission that his plan to reflate the long moribund-economy had derailed.


Posted in Central Banks, Monetary Policy, QE |

US personal income +0.2% in Sep, below expectations of +0.3%, vs +0.3% in Aug; PCE -0.2% below expectations of +0.1%, vs +0.5% in Aug.

Posted in Economic Data |

Gold sharply lower at 1166.00 (-34.11). Silver 15.90 (-0.61). Dollar higher. Euro lower. Stocks called higher. US 10yr 2.33% (+3 bps).

Posted in all posts |

As deflation deadline nears, BOJ faces prospect of failure

29-Oct (Reuters) – With just five months left before Governor Haruhiko Kuroda’s self-imposed deadline for banishing deflation, the Bank of Japan is preparing for failure, and the first casualty could be its facade of board unity.

There is almost no way the central bank can hit the two-year, 2 percent inflation target Kuroda set when he unleashed unprecedented monetary stimulus in April 2013. Economists think it is unlikely to even get close in the foreseeable future.

That could undermine Kuroda’s so far unchallenged authority to implement radical policies and cast doubt on his money-printing drive to revive Japan’s economy, interviews with more than a dozen current and former BOJ officials and insiders show.

“The board members gave Kuroda’s experiment a one-year moratorium,” said a former central bank board member who still has close contacts with incumbent policymakers. “They decided to wait-and-see for a year. But now it’s time of reckoning.”


Posted in Central Banks, Monetary Policy, QE |

Fed ends stimulus, faces new hurdles

30-Oct (USA Today) — The successful end of the Federal Reserve’s monetary stimulus program is an important milestone on the road back to financial normalcy, but there are still some treacherous hurdles ahead.

Fed officials had clearly announced that its monthly purchase of bonds – a way of injecting more money into the financial system – would be ending this month after they have been reducing the amount purchased since last December.

The fact that the actual decision announced Wednesday caused scarcely a ripple in the markets is a tribute to the Fed’s growing ability to manage investor expectations – a communications exercise that Fed officials call “forward guidance.”

…It’s a tall order and will require the Fed to maintain a delicate balance between too little and too much monetary accommodation while managing investor expectations.

This week marked an important step forward, but monetary officials will not be resting on their laurels.


Posted in Central Banks, Monetary Policy |

Greenspan upstages the Fed to offer some free investment advice

30-Sep (Washington Post) — The Federal Reserve brought an end to a chapter of its unconventional monetary policy on Wednesday with little fanfare and no surprises. Well, almost. About the same time as Fed policymakers were preparing the announcement, former Fed chairman Alan Greenspan decided it would be an appropriate time to share a few of his own views about the state of the economy.

Greenspan said he thought quantitative easing, the program the Fed ended Wednesday, hadn’t done anything to stimulate the economy. That’s fair enough. Plenty of economists agree. He went on to say he thought that the lingering effects of quantitative easing could lead to inflation more or less at any moment, and that inflation is now basically out of the Fed’s control.

Then he told his audience to buy gold. Apparently, Greenspan doesn’t even think hiding your money in a mattress will keep it safe in the turmoil that’s inevitably coming to global markets.


Posted in all posts, Gold News, Gold Views |

The Daily Market Report: Gold Dips Back Below $1200

30-Oct (USAGOLD) — Gold fell to a three-week low, probing back below $1200, on the back of a better than expected advance Q3 GDP print. The GDP beat came in the heals of yesterday’s FOMC statement, which was interpreted as being more hawkish than expected.

The Fed official ended the QE3 asset purchase program yesterday, as was widely expected. While the FOMC maintained its “considerable time” language, the committee expressed heightened optimism about the labor market.

The latter caught the market a little off guard, returning some measure of credence to forecasts that the first Fed rate hikes could come sometime in 2015. That pushed the dollar higher, which weighed on the yellow metal.

Wall Street Journal Fed watcher Jon Hilsenrath said Fed chair Yellen surprised with her willingness to displease the other doves on the FOMC. You may recall that the September FOMC statement was perceived as being more dovish than expected. Hilsenrath says Yellen is trying to be a consensus builder.

A more suspicious interpretation, is that in alternately throwing some seed to the doves, and then some fresh meat to the hawks, Ms. Yellen is purposefully attempting to keep investors off-guard. She wants to mitigate growth and deflation risks as best she can, while simultaneously preventing asset bubbles from becoming overinflated again.

Today’s better than expected Q3 GDP number moved the rate lift-off needle again, but it seems most of the firmness came from government spending. Consumption and investment in Q3 was actually pretty disappointing.

Even as the Fed took on perhaps a modestly more hawkish mantle, the Washington Post suggested today that the central bank was “upstaged” by former Fed chair Alan Greenspan’s investment advice.

Then he told his audience to buy gold. Apparently, Greenspan doesn’t even think hiding your money in a mattress will keep it safe in the turmoil that’s inevitably coming to global markets. — Washington Post

In a separate interview, Greenspan said he expected gold to be “measurably” higher over the next five-years:

Q: “Where will the price of gold be in 5 years?”
Greenspan: “Higher.”
Q: “How much?”
Greenspan: “Measurably.”

The WaPo points out that Greenspan correctly forecast that inflation would remain tame during the easy monetary policy regime he oversaw as chairman of the Fed. However, his recommendation to buy gold may be suggestive of his growing concern that inflation expectations may ultimately become ‘unanchored’.

You probably can’t blow up a cental bank’s balance sheet to the tune of $3 trillion (not to mention all the liquidity pumped by other central banks) in a six-year period without some undesirable results manifesting. Gold is of course the classic hedge against inflation and so-called ‘black swan’ events.

Greenspan was pretty adamant in his speech yesterday that the Fed’s QE experiment has been a flop, noting that “effective demand is dead in the water.” So, even if deflationary pressures prevail, historically gold has served as a pretty affective hedge against those risks as well. Just look at what gold prices did during the Great Depression for proof.

Posted in Daily Market Report, Gold News, Gold Views |

Yellen Surprises With Willingness to Displease Doves

30-Oct (The Wall Street Journal) — A Wall Street Journal article in September described how Janet Yellen was establishing herself as a consensus building leader of the Federal Reserve, rather than the pushy dove always in favor of easy money policies that some expected.

A quick examination of dissent patterns at Fed policy meetings underscores this point. Ms. Yellen is proving herself willing to displease both doves who want more easy money and hawks who want less. That suggests she is tending to play tough decisions down the middle rather than siding with the doves.

After Wednesday’s policy decision, Ms. Yellen has now run six policy meetings and experienced five dissents at those meetings. Two of those five dissents have come from Minneapolis Fed President Narayana Kocherlakota, a policy dove in favor of easy money. On Wednesday he wanted to stick with the Fed’s bond buying program and signal a firmer commitment to keeping short-term rates low.

Former chairman Ben Bernanke experienced only four dovish dissents in his eight years running the Fed from 2006 through January 2014, out of 48 dissents in all. He was usually displeasing the hawks.


Posted in Central Banks, Monetary Policy |

Russia buys most gold for reserves since ’98

29-Oct (Bloomberg, via MineWeb) – Russia boosted gold reserves by the most since defaulting on local debt in 1998, driving its bullion holdings to the largest in at least two decades.

The country expanded its stockpile, the world’s fifth- biggest, by 37.2 metric tons in September to 1,149.8 tons, according to data on the International Monetary Fund’s website. The increase, valued at about $1.5 billion, was the biggest since November 1998. Russian reserves, which overtook those of Switzerland and China this year, almost tripled since the end of 2005 and are at the highest since at least 1993, the data show.


Posted in Gold News, Gold Views |

Q3 GDP Rises 3.5% Despite Sharp Slowdown In Consumption, Pushed Higher By Government Spending Spree

30-Oct (ZeroHedge) — Moments ago, the market was expecting Q3 GDP to print at 3.0%, and was pleasantly surprised when instead it got a 3.5% print, sending all risk assets kneejerk higher. However, a quick glance into the components revealed that things were certainly not as they seemed, with Personal Consumption in Q3 actually decreasing notably from Q2′s 2.5%, to just 1.8% in Q3, below the 1.9% Expected, and accounting for 1.22% of the 3.54% Q3 GDP, the lowest Personal Consumption boost to GDP since Q2 2012 excluding the infamous Q1 winter vortex quarter.

…So what happened to boost Q2 GDP if that core driver, the US consumer was not there? Simple. Government stepped in, and stepped in hard, with its 0.83% boost to the bottom line GDP the highest since Q2 of 2009!


Posted in Economic Data, Economy |

Gold slides towards $1,200/oz after upbeat Fed statement

30-Oct (Reuters) – Gold prices slid towards $1,200 an ounce on Thursday, hitting their lowest in 3-1/2 weeks, after the Federal Reserve ended its bond-buying stimulus programme on an unexpectedly hawkish note.

Spot gold fell as low as $1,201.21 an ounce and was down 0.5 percent at $1,206.40 an ounce at 1015 GMT. U.S. December gold futures were down $19 at $1,205.80.

The Fed statement on Wednesday sent the dollar to its highest since Oct. 6, while U.S. rate futures shifted to show better-than-even chances of a rate hike next September. Previously, they had indicated a rise in October.

That dented interest in gold, which as a non-yielding asset tends to benefit from ultra-low rates.


Posted in Gold News, Gold Views |

US initial jobless claims +3k to 287k in the week ended 25-Oct, above expectations of 281k, vs upward revised 284k in the previous week.

Posted in Economic Data |

US Q3 GDP (advance) +3.5%, above expectations of +3.0%, vs +4.6% in Q2.

Posted in Economic Data |

Gold lower at 1202.00 (-10.50). Silver 16.63 (-0.49). Dollar higher. Euro lower. Stocks called lower. US 10yr 2.31% (-1 bp).

Posted in all posts |

Last Chance for Japan?

by Stephen Roach
29-Oct (ProSyn) – Japan is the petri dish for the struggle against the secular stagnation that is now gripping most major developed economies. And, notwithstanding all of the fanfare surrounding “Abenomics,” Japan’s economy remains moribund. In the six quarters of Shinzo Abe’s latest stint as prime minister, annualized real GDP growth has averaged just 1.4% – up only slightly from the anemic post-1992 average of 1%.

Abenomics, with its potentially powerful combination of monetary and fiscal stimulus, coupled with a wide array of structural reforms, was supposed to end Japan’s “lost decades.” All three “arrows” of the strategy were to be aimed at freeing the economy from a 15-year deflationary quagmire.

Unfortunately, not all of the arrows have been soaring in flight. The Bank of Japan seems well on its way to delivering on the first one – embracing what it calls quantitative and qualitative easing (QQE). Relative to GDP, the BOJ’s monetary-policy gambit could actually far outstrip the efforts of America’s Federal Reserve.

But the flight of the other two arrows is shaky, at best. In recent days, Abe has raised serious questions about proceeding with the second phase of a previously legislated consumer-tax hike that has long been viewed as the linchpin of Japan’s debt-consolidation strategy. Abe has flinched because the economy remains weak, posing renewed risks of a deflationary relapse. Meanwhile, the third arrow of structural reforms – especially tax, education, and immigration reforms – is nowhere near its target.

…Japan is running out of time. In the grip of two lost decades and counting, this could be Japan’s last chance.


Posted in Central Banks, Economy, Monetary Policy, QE |

Former Fed Chief Greenspan Worried About Future of Monetary Policy

29-Oct (The Wall Street Journal) — Former Federal Reserve Chairman Alan Greenspan said Wednesday that the Fed’s bond-buying program, which aimed to lower unemployment and spur stronger economic growth, fell short of its goals.

Mr. Greenspan’s comments to the Council on Foreign Relations came as Fed officials were meeting in Washington, D.C., and expected to announce within hours an end to the bond purchases.

He said the bond-buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy.

“Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” said Mr. Greenspan. Boosting asset prices, however, has been “a terrific success.”

Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.


PG View: With the price of gold down in reaction to today’s policy statement, now might be the perfect time to heed the former chairman’s investment advice.

Posted in Central Banks, Gold News, Gold Views, Monetary Policy, QE |

Greenspan: Fed can’t exit without turmoil

29-Oct (MarketWatch) — The Federal Reserve won’t be able to exit from its accommodative monetary policy without some turmoil in financial markets, former U.S. central bank chairman Alan Greenspan said Wednesday on the eve of an interest-rate decision.

During an appearance at the Council of Foreign Relations in New York, Greenspan was asked if the Fed could engineer an exit without sparking a crisis.

Greenspan said he didn’t like the word “crisis” but that “turmoil” was a good substitute.

Then he replied, “I don’t think it is possible.”


Posted in Central Banks, Markets, Monetary Policy |

Greenspan: Price of Gold Will Rise

29-Oct (Merk) — Any doubts about why I own gold as an investment were dispelled last Saturday when I met the maestro himself: former Fed Chair Alan Greenspan. It’s not because Greenspan said he thinks the price of gold will rise – I don’t need his investment advice; it’s that he shed light on how the Fed works in ways no other former Fed Chair has ever dared to articulate. All investors should pay attention to this.

Q: “Where will the price of gold be in 5 years?”
Greenspan: “Higher.”
Q: “How much?”
Greenspan: “Measurably.”


Posted in Central Banks, Gold News, Gold Views, Monetary Policy |

Fed Cites Improved Labor Market While Ending QE as Planned

29-Oct (Bloomberg) — The Federal Reserve said it sees further improvement in the labor market while confirming it will end an asset-purchase program that has added $1.66 trillion to its balance sheet.

“Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate,” the Federal Open Market Committee said today in a statement in Washington. “A range of labor market indicators suggests that underutilization of labor resources is gradually diminishing,” the panel said, modifying earlier language that referred to “significant underutilization” of labor resources.

Policy makers maintained a pledge to keep interest rates low for a “considerable time.”


Posted in Central Banks, Economy, Monetary Policy, QE |

Gold slides to new low for the week as Fed announces end of QE, maintains “considerable time” language, but expresses more optimism on jobs.

Posted in Central Banks, Gold News, Monetary Policy, QE |

The Daily Market Report: Gold Eases Ahead of FOMC Policy Statement

29-Oct (USAGOLD) — Gold slipped modestly ahead of today’s FOMC statement, but so too did the dollar. The Fed is widely expected to hold steady on policy, while acknowledging the end of QE3.

As we reported yesterday, the Fed is wary of doing anything today that might “unsettle” markets. The market they are most concerned about is probably the stock market, but the Fed will likely parse their words very carefully today.

We saw a couple more good articles on the Swiss gold referendum today, one from The Wall Street Journal, and one from Bloomberg. The general gist of both articles is that investors seem to be positioning for the possibility that the measure passes; essentially buying protection in the options market. “Protection” against a surge in the Swiss franc (and a caving-in of its ceiling against the euro), and a surge in gold.

“The market impact of a yes-vote would likely be quite spectacular.” — UBS strategist Beat Siegenthaler

For the best comprehensive take on the referendum, be sure to read Grant Williams’ piece: This Little Piggy Bent The Market

We’ll see what impact the Fed has later today, but my guess is that they are hoping the policy statement is a ‘non-even’. With no presser and no economic forecasts this month, they are likely to get their wish. The real fun in the gold market could come in the weeks leading up to the Swiss referendum, and certainly if the measure passes.

“I think there is a VERY good chance the motion will get passed; and I think that, when it does, it will spark calls for similar actions in neighbouring countries such as Austria, for example, or maybe the Netherlands,” says Williams.

I’ve always maintained that deflation is the worst nightmare of central bankers. However, the contagion of this notion that currencies should be backed — at least to some degree — by a hard asset such as gold, would have to be right at the top of their list of scary dreams as well.

Posted in Daily Market Report, Gold News, Gold Views |

Secular stagnation: the scary theory that’s taking economics by storm

28-Oct (Vox) — Until the summer of 2013, positively nobody was talking about “secular stagnation.” But over the past year or so, interest in the subject has boomed to the extent that we already have economics writers complaining that other writers are misusing the term and scholars making formal models to show how it’s possible. Google Trends shows that discourse around the idea is surging.

For starters, it has nothing to do with secular versus religious. Instead, the term comes to us from a 1939 presentation given by Alvin Hansen titled “Economic Progress and Declining Population Growth.” In these tailing days of the Great Depression, Hansen was trying to draw a contrast between a cyclical period of slow growth and a structural transformation of the economy. Hansen believed that the world was not experiencing a down period during an up-and-down series of fluctuations. Instead, he said, “we are passing, so to speak, over a divide which separates the great era of growth and expansion of the nineteenth century” from a new era of much slower growth.

The return of interest in the phrase is overwhelmingly due to the efforts of former Treasury Secretary and former National Economic Council director Lawrence Summers. Summers raised the specter of secular stagnation at an International Monetary Fund conference in 2013, saying rather elliptically that he wondered if such discarded ideas “may not be without relevance to America’s experience” as being “profoundly important in understanding Japan’s experience.”

He has followed up with a number of op-eds and scholarly talks on the subject , which in turn have triggered a great deal of additional commentary. Recently Robert Shiller, a Nobel Prize winning economist, argued that the growing influence of Summers’ revival of the term was responsible for the large stock market downturn that played out in early fall 2014.


Posted in Economy |