‘Central banks can do nothing’: Jakobsen
- 2016 has seen a popular reaction against zero-bound policies
- Political elites are struggling to preserve an unfruitful status quo
- ‘The world has become elitist in every way’: Jakobsen
- Political middle has become crowded, stagnant; new spectrum of ideas needed
- Investment in education and research needed; zero rates are a dead end
- Saxo chief economist remains ‘very positive’ overall
In April 2015, Saxo Bank chief economist Steen Jakobsen said that zero rates, zero growth, zero productivity, and zero reforms have left a great many countries adrift in a “new nothingness”.
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The products of this nothingness, said Jakobsen, include apathy, stagnation and “an economic outlook based more in peoples’ heads than in reality”. On the cultural level, he continued, the widespread lack of dynamism and new ideas has empowered a political class that is “mainly interested in maintaining the status quo”, even as that status quo provides sharply diminishing returns.
US GDP growth, for instance, is hugging the zero line:
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Source: Federal Reserve Economic Data
A little more than one year on and we remain, in terms of economics and monetary policy at least, profoundly entranced by this combination of zero-bound policies and continual “emergency measures”.
Culturally and politically, however, the past 12 months have demonstrated time and time again that nature abhors a vacuum.
In Europe, for instance, we have the spectacle of the European Union’s second-largest economy voting on whether it wants to leave the union next month. In the United States, the candidacies of Democratic senator Bernie Sanders and Republican front-runner Donald Trump have benefitted enormously from widespread frustration with the current consensus, particularly in the realm of trade where both candidates – one hard left, one populist right – point to a declining US manufacturing sector and a recovery bereft of “breadwinner” jobs as signs that the country has been led astray.
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