{"id":25231,"date":"2017-09-05T07:23:05","date_gmt":"2017-09-05T12:23:05","guid":{"rendered":"http:\/\/olduvai.ca\/?p=25231"},"modified":"2017-09-05T07:23:05","modified_gmt":"2017-09-05T12:23:05","slug":"the-normalization-delusion","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=25231","title":{"rendered":"The Normalization Delusion"},"content":{"rendered":"
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The Normalization Delusion<\/a><\/h3>\n<\/header>\n
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LONDON \u2013 There is a psychological bias to believe that exceptional events eventually give way to a return to \u201cnormal times.\u201d Many economic commentators now focus on prospects for \u201cexit\u201d from nearly a decade of ultra-loose monetary policy, with central banks reducing their balance sheets to \u201cnormal\u201d levels and gradually raising interest rates. But we are far from a return to pre-crisis normality.<\/p>\n

After years of falling global growth forecasts, 2017 has witnessed a significant uptick, and there is a good case for slight interest-rate increases. But the advanced economies still face too-low inflation and only moderate growth, and recovery will continue to rely on fiscal stimulus, underpinned if necessary by debt monetization.<\/p>\n

Since 2007, per capita<\/i> GDP in the eurozone, Japan, and the United States are up just 0.3%, 4.4%, and 5%, respectively. Part of the slowdown from pre-crisis norms of 1.5-2% annual growth may reflect supply-side factors; productivity growth may face structural headwinds<\/a>.<\/p>\n

But part of the problem is deficient nominal demand. Despite central banks\u2019 massive stimulus efforts, nominal GDP from 2007-16 grew 2.8% per year in the US, 1.5% in the eurozone, and just 0.2% in Japan, making it impossible to achieve moderate growth plus annual inflation in line with 2% targets. US inflation has now undershot the Federal Reserve\u2019s target for five years, and has trended down over the last five months.<\/p>\n

Faced with this abnormality, some economists search for one-off factors, such as \u201cfree\u201d minutes for US cell phones, that are temporarily depressing US inflation measures. But mobile-phone pricing in the US cannot explain why Japan\u2019s core inflation is stuck around zero. Common long-term factors must explain this global phenomenon.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Normalization Delusion LONDON \u2013 There is a psychological bias to believe that exceptional events eventually give way to a return to \u201cnormal times.\u201d Many economic commentators now focus on prospects for \u201cexit\u201d from nearly a decade of ultra-loose monetary policy, with central banks reducing their balance sheets to \u201cnormal\u201d levels and gradually raising interest […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[10516,353,1357,426,534,8402,658],"class_list":["post-25231","post","type-post","status-publish","format-standard","hentry","category-economics","tag-adair-turner","tag-gdp","tag-global-growth","tag-inflation","tag-monetary-policy","tag-project-syndicate","tag-psychology"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=25231"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25231\/revisions"}],"predecessor-version":[{"id":25232,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25231\/revisions\/25232"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=25231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=25231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=25231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}