A frustrating economic malady is stagflation, in which typical remedies to solve one aspect (inflation) aggravate the second facet (stagnation). As the world’s economies struggle with the COVID effect, stagflation is rearing its head after being in remission for nearly half a century. How policymakers respond now will determine its future course.
US Federal Reserve
October 19, 1987, will go down in infamy as Black Monday, the day Wall Street unexpectedly set new records for losses. In most cases of stock market collapse, definite causes can be easily identified, but in this instance, a consensus has not yet been reached. What triggered this crash, and what corrective measures were taken in response?
COVID-19 has reinforced the dividing line between the developed and developing worlds. Recovery in developed countries, with high vaccination rates and generous fiscal stimuli, is impressive. But the situation is the opposite in developing nations. The future is as unpredictable as the virus, but experts are forecasting what may happen.
US bond yields have remained stubbornly low, flying in the face of key indicators such as rising inflation and employment. The US isn’t the only country with low bond yields, and many credit lingering pandemic uncertainties. Failing a robust, sustained recovery in confidence and economic performance, they may continue to languish.
The Covid-19 pandemic has impacted all the economies, big or small, across the globe. Central banks everywhere have been proactively dealing with the situation and have successfully pushed a large amount of liquidity to the banks through various means. However, due to widespread uncertainty caused by the pandemic, banks are reluctant to lend, and consumers are hesitant to avail credit. This article highlights the adverse impact that surplus liquidity may have on the banks and economies if adequate demand is not created.
Lumber prices were an unlikely beneficiary of COVID-19 stay-at-home orders; people stuck at home became do-it-yourself carpenters, creating a huge demand for a limited supply. But prices have tapered off in the last couple of months, and many are wondering if the frenzy is over and lumber prices will settle down to pre-pandemic levels.
The Bank of Japan is adding more grit to its campaign to incentivize Japan’s financial sector to fight climate change by supporting sustainability projects and unravelling financing for fossil-fuel sectors. The strategy will involve various lending measures to encourage banks to incorporate climate-mitigation action in their funding.
Banks are suffering from a problem: cash. Not long ago, many struggled to maintain liquidity, then COVID-19 arrived. Consumers and businesses have flooded them with deposits, as governments have doled out aid, uncertainty has made safe havens attractive, and continual lockdowns have restricted activity. But this is likely to change soon.
The Wells Fargo brand transitioned from top-notch to tarnished over the past decade after one of the United States’ leading banks became a case study in customer abuse. Under new leadership, the bank is diligently striving to meet the requirements placed on it by regulators and is experiencing renewed customer and shareholder trust; its fortunes may be reversing after a damaging period of highly publicised scandals and resulting disciplinary measures.
Digitisation has strengthened the trend toward a cashless system, with central banks exploring the feasibility of central bank digital currencies. Spearheaded by The Bahamas with its release of the sand dollar, many central banks are in various stages of releasing their own cryptocurrencies. Although China is the dominant leader in CBDC development, other central banks are catching up. CBDCs share some of the attributes of popular cryptocurrencies but not all.