After having been considered to head of both the Federal Reserve and the Bank of Israel earlier this year, Lawrence Summers has been propelled back into the center of the broader economic dialogue with a speech at a recent IMF Economic Forum.
Essentially his argument is deceivingly simple and straight forward. The natural or neutral interest rate, which is needed to achieve full employment is below zero. Given the relationship between labor force growth and the natural rate of interest, the demographic outlook suggests that negative interest rates may be necessary for a prolonged period. Moreover, for the past 30-years, it has been arguably debt-fueled bubbles that allow the economy to reach full employment and bolster the natural interest rate.
There is little that is new in Summer's argument, but it has captured much territory in traditional media and the blogosphere. Economists have been fretting of a New
The global markets rebounded sharply in September, with most of the major asset classes posting handsome gains. The main exception: broadly defined commodities, which retreated nearly 3%. Otherwise, there was a bull-market party across the board at the finale for the third quarter, led by a potent 8.6% rise last month in foreign real estate/REITs. In fact, foreign assets in unhedged US dollar terms generally fared quite well in September, including a strong revival in emerging markets equities, which advanced 6.5%--the best month for this slice of global equities in more than a year. Unsurprisingly, the Global Market Index—an unmanaged, market-weighted benchmark of all the major asset classes—earned a handsome gain in September, rising 3.9%. That’s
August was a rough month for the major asset classes, with one key exception: commodities. The DJ-UBS Commodity Index popped 3.4% last month. Otherwise, red ink was the dominant theme. In fact, positive performance has become scarce on a year-to-date basis as well. US stocks are still bucking the trend, however, with a strong 17% rise in 2013 through the end of last month, based on the Russell 3000. Meanwhile, the Global Market Index (GMI), a markets-weighted, unmanaged mix of all the major asset