May 21, 2016

IT'S A DEFLATIONARY EPOCH:

Is the End of Economics 101 Nigh? Nordic Bankers May Know Answer (Peter Levring, May 18, 2016, Bloomberg)

Is the link between monetary policy and inflation broken?

The central bank governor of Denmark, where nominal rates have been negative longer than anywhere else in the world, says there may be signs that the link has grown weaker.

"We're in a territory where we don't have very much experience, so we can't rule out the possibility that the relationship between rates and inflation isn't as strong as it used to be," Lars Rohde, 62, said in an interview at the central bank in Copenhagen. "Inflation requires demand pressure and globally there's very little demand pressure."

Specifically, it requires demand pressure for wage increases, which demographics, automation, off-shoring and free trade guarantee we won't have in any meaningful measure for the forseeable future.

Posted by at May 21, 2016 7:27 AM

  

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