Public Debt, Climate Change, and Future Generations

I look forward to the day my grandchildren ask me “Why didn’t you invest when interest rates were negative? It could have limited global warming as we burn today. ”

I will say then, “Very smart people thought that the public debt was too high. Negative rates were then an opportunity to reduce it” and they answer me “isn’t it a lack of foresight, of perspicacity?”

The climate challenge for future generations is more important than an accounting view of the public debt. We fear to leave them a debt too high that could constrain them. Not taking advantage of current opportunities is the best way to constrain their life and their future.

What to expect next week ? (August 12 – August 18, 2019)


=> The recent volatility on financial markets, through lower interest rates, was the consequence of lower expectations on global growth after the White House announcements. In the coming week, there will be data on retail sales in the US (15), China (14) and UK (15). These data will show the robustness of the domestic demand. If these data are strong in the US and in China, financial arbitrage may be modified in favor of risky assets

=> GDP growth in Germany will be, in the Euro Area, the most important indicator of the week (14). The industrial production index dropped dramatically in the second quarter (-7.5% at annual rate) and this downturn is consistent with a negative growth figure (probably more than the consensus at -0.1%).
The ZEW survey for August (13) will highlight the duration of this drop —Employment figures in the Euro Area and the detail for GDP will be released on August the 14th.

=> Employment figures will be important as the unemployment rate is low now (7.5% in June) and the economic dynamics is lower.




The recession is at the corner

Investors do not see how to exit from uncertainties. They rush on non-risky assets. The recession at the corner #monetarypolicy #recession

In the past, when all market rates on the US public debt were below the fed funds rate, this was a harbinger of a recession. The current period will not escape the rule. The decline in rates reflects a strong pessimism over the next few months and the incapacity to bet on the future.

The future of globalization


TEDx lecture by Richard Baldwin. Globalization will change dramatically in a foreseeable future. We will always trade goods but we will mainly trade services that we do not currently do. Technology will make it possible as it will geographically dissociate services between those who do and those who receive. The world will become truly global. It’s fascinating.

Click on the picture

The pace of the US labor market is changing

T he US job market has really changed pace in the past six months. It stabilizes but the trend is not on the downside yet. It will be for the second half of the year.
Households have the perception that the trend is no longer improving and the number of available jobs no longer increases. As growth slows, the job market will inevitably change pace. It will be interesting just a few months before the presidential elections