Stock market dive might be good for the economy

first_imgSo far, so pessimistic.But the United States has a history of defying gloomy predictions.Economists predicted “secular stagnation” in the 1940s, right before the 1950s boom, and today there are signs that Fed estimates of R* are too cautious.Jason Cummins, the research chief at a major hedge fund and a candidate to lead the New York Fed, points out that capital expenditure is recovering; expectations of capital expenditure are soaring; and the personal saving rate has fallen back to its pre-crisis low.In Washington, the Trump tax cut means that the government saving rate is falling dramatically as well: We are back on the path to a trillion-dollar deficit.Meanwhile in Silicon Valley, some venture capitalists are shifting to capital-hungry projects — medical robotics, next-gen nuclear fusion, satellites and so on.Globally, healthy economies have dulled investors’ urge to park money in the United States because of its safe-haven status. All of which suggests that savings in the United States will be less abundant, demand for them will be more abundant, and the natural interest rate will move higher.Unless markets suddenly reverse themselves, the recent bondcano probably reflects an awakening.When investors revise up their view of interest rates, bond prices tumble.For many professional money managers, these may well be scalding times.But for the economy as a whole, a higher R* would be a sign that the post-2008 malaise is finally healing. Sebastian Mallaby, author of “The Man Who Knew: The Life & Times of Alan Greenspan,” is the Paul A. Volcker senior fellow for international economics at the Council on Foreign Relations and a contributing columnist for The Washington Post. More from The Daily Gazette:EDITORIAL: Urgent: Today is the last day to complete the censusEDITORIAL: Find a way to get family members into nursing homesFoss: Should main downtown branch of the Schenectady County Public Library reopen?EDITORIAL: Thruway tax unfair to working motoristsEDITORIAL: Beware of voter intimidation No matter how many jobs the economy created, many feared it would never return to the pre-crisis condition in which buoyant hiring could coexist with decent returns for savers. This pessimism has been most evident among Federal Reserve leaders.Members of the Fed’s monetary committee regularly publish their views of the appropriate long-run interest rate, known as “R*” in the jargon.This is the interest rate that the economy needs to achieve stable inflation and maximum employment.A high R* is generally good news: It means that businesses want to borrow and expand aggressively, so you can get to full employment even when interest rates are relatively high.Workers can do well even as savers do well.Think back two decades, when unemployment was low, wages were rising and savers enjoyed a risk-free 5.5 percent return on their money. Categories: Editorial, OpinionWall Street is always quick with colorful disaster metaphors, and the latest market convulsion has already been dubbed the “bondcano.” The bad news is that, in the judgment of Fed leaders, R* has come down sharply. Since 2012, the median estimate of the long-run interest rate published by monetary committee members has fallen from a bit over 4 percent to under 3 percent — this means that, stripping out inflation, the estimate for the real interest rate has collapsed by about two-thirds.Businesses seem unexcited about borrowing and investing, the Fed chiefs are saying. Interest rates will have to stay low to generate full employment.For anyone with a retirement fund, this is a grim prospect.The lower the return on savings, the more you have to set aside to afford retirement.For the past several years, admittedly, this truth has been obscured: Stocks have had a glorious run as low interest rates have chased savings into the markets.But that portfolio shift is probably over, and may well have overshot. From here on out, workers seeking to build up their retirement funds may have to save more and work longer.  But a little lava spillage can be a hopeful sign.LATEST: Wall Street ends day higher, halting global routFor the first time since the financial crisis of 2008, a strange cloud that has hung over the economy may finally be lifting.By most measures, the economy has performed well since 2008.The recovery has so far lasted for 103 months and will soon rank as the second-longest post-war expansion.GDP is up by 2.5 percent over the past year, not bad for a graying society; unemployment is at a rock-bottom 4.1 percent.But an uneasy feeling has haunted the celebration. How did the economy get stuck in this rut?The gloomy estimates of R* reflect a conviction that, even before the 2008 shock, powerful forces were pushing down on interest rates. The aging of the baby boomers boosted the saving rate.So did the rise in inequality — more of the national income was flowing to people who could afford to save it.The growing supply of capital was met with falling demand for capital, pushing down the natural interest rate further.Slowing productivity gains suggested that there were not that many great machines that businesses wanted to buy — hence sluggish business investment.Even the exciting breakthroughs in Silicon Valley were not capital-hungry.You can launch a ride-sharing company or a digital coin without buying much machinery. last_img read more

Arsenal join Leicester and Newcastle in hunt for Brentford winger Said Benrahma

first_imgAdvertisement Metro Sport ReporterFriday 7 Feb 2020 8:04 amShare this article via facebookShare this article via twitterShare this article via messengerShare this with Share this article via emailShare this article via flipboardCopy link2.3kShares Comment Said Benrahma is attracting Premier League interest (Picture: Getty Images)Arsenal are keeping tabs on Brentford winger Said Benrahma, with Leicester City and Newcastle United also holding an interest in the Championship star.The 24-year-old has caught the eye for the Bees since signing from French Ligue 2 side Chateauroux in 2018.He scored 10 league goals last season and has eight to his name this campaign as the London side battle for promotion to the Premier League.It seems that reaching the top flight would be the only way Brentford would keep hold of the Algeria international, with Premier League clubs circling for his signature.ADVERTISEMENTThe Sun reports that a fee of around £15m will be offered for the winger over the summer, which would represent a huge profit for Brentford, who paid just £1.5m for him two years ago.AdvertisementAdvertisementLeicester and Newcastle reportedly hold the firmest interest in Benrahma, but the Telegraph credit the Gunners as a club that admires his talents.Benrahma scored a hat-trick in Brentford’s 5-1 win over Hull last weekend, just days after the death of his father.Bees manager Thomas Frank hailed his star player’s commitment and quality after the emotional performance.‘We all know it’s very difficult when people lose a loved one. We gave him (Benrahma) all the time off that he needed to get his head in the right place,’ said the Danish boss.More: FootballRio Ferdinand urges Ole Gunnar Solskjaer to drop Manchester United starChelsea defender Fikayo Tomori reveals why he made U-turn over transfer deadline day moveMikel Arteta rates Thomas Partey’s chances of making his Arsenal debut vs Man City‘It was a very nice tribute for his father. He’s had some emotional days but he said he wanted to play for his Dad and do the best he can.‘He was magnificent in his actions, his touches and of course scoring three goals. It was a fantastic performance from him.’Brentford are currently fifth in the Championship after the crushing victory over the Tigers boasting the best defence in the division, having conceded just 23 goals in 30 games.MORE: Arsenal consider move to sign Liverpool midfielder Adam Lallana on free transferMORE: Arsenal trying to convince Arsene Wenger to return to clubcenter_img Arsenal join Leicester and Newcastle in hunt for Brentford winger Said Benrahma Advertisementlast_img read more

Robert Prosinecki names Squad against Italy and Finland for UEFA European Championship 2020 Qualifiers

first_imgBosnia and Herzegovina (BiH) coach Robert Prosinecki on Monday announced the list of 24 players for the matches against Italy and Finland in UEFA European Championship 2020 qualifiers.Following is the BiH squad:Goalkeepers: Ibrahim Sehic, Kenan Piric, Vladan KovacevicDefenders: Ermin Bicakcic, Ervin Zukanovic, Toni Sunjic, Samir Memisevic, Sead Kolasinac, Eldar Civic, Darko TodorovicMidfielders: Muhamed Besic, Elvis Saric, Amer Gojak, Gojko Cimirot, Rade Krunic, Stjepan Loncar, Mario Vrancic, Deni Milosevic, Haris DuljevicForwards: Edin Dzeko, Edin Visca, Goran Zakaric, Riad Bajic, Smail Prevljak.last_img read more