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The Fed Should Buy Recession Insurance

10 3 3
15.03.2019

BERKELEY – The next global downturn may still be a little way off. The chances that the North Atlantic as a whole will be in recession a year from now have fallen to about one in four. German growth may well be positive this quarter, while China could rebound, too. And although US growth is definitely slowing – to 1% or so this quarter – this may yet turn out to be a blip.

Mar 4, 2019 Emmanuel Macron calls on EU citizens to focus on three goals ahead of the critical European Parliament election in May.

Feb 27, 2019 Raghuram G. Rajan argues that beggar-thy-neighbor policies cannot solve the problems facing declining communities.

Feb 11, 2019 George Soros argues that the EU cannot be saved without transforming its political party systems.

Let’s hope so. Because if the next downturn is looming, North Atlantic central banks do not have the policy room to fight it effectively. Should a recession arrive, the US Federal Reserve would ideally be able to cut interest rates by five percentage points, as is customary in such situations. But with short-term safe interest rates currently at 2.4%, it cannot. And with euro and yen........

© Project Syndicate