MACRO ECONOMIC NEWS

One More Smile This Friday

Wishing An Extra Happiness Ahead

 

Best Regards

Arbind

 

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Macro-Economic News 05 Feb 2021

 

Debt GDP ratio – discussed more often these days, especially on the global risk context – is nothing but persistent illusion; to quote Einstein, “The distinction between the past, present and future is only a stubbornly persistent illusion.” Obviously, the numerator (Debt) is a forward-looking (wishful) number while the denominator is the outcome of past action of hopes. The submissive best ratio may need adjustment of ‘Conversion lag’ often gets blurry with various intentional and structural frictions in the capital formation process. A significant group of economists is vouching for debt unwinding; while others say it’s too early to discuss tapering. Although the structure of Debt and the usefulness of the GDP as a measure of economic activities require a separate deeper insight. 

 

At least Central banks – as of now – opine that it is still premature to start a debate on scaling back its massive bond-buying program. In the line of FED keeping its interest rates unchanged near zero last week, other central banks also seem to rely heavily on the fiscal stimulus until “substantial progress” is made. The Australian economy has also improved but its central bank expects to keep interest rates will low for “quite a while yet” despite inflation if it arises. The RBA expects not to raise interest rates until at least 2024 with employment and inflation remaining well short of the target, although at a little elevated level.

 

The US – alongwith other economies – targets to go back to the pre-pandemic level with low joblessness boosted prosperity without overheating the economy and igniting inflation. The quickness of reaching back is the essence of the time as persistent unemployment irritates everyone – people to policymakers. 

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