The US economy and financial system is a mess of
contradictions right now.
Bond yields are hitting record lows while the stock market is hitting record highs. The labor market is signaling full employment, but GDP growth remains lackluster.
According to the fixed income research team at Deutsche Bank, there is a way for these conundrums to work themselves out, but it will take some pain for us to get there.
Specifically, stock market crash pain.
Essentially, Deutsche's fixed income research team argues that many of the issues facing the financial system come from central banks using interest rate cuts, asset purchases, and other monetary policy measures to spur economic growth.
The team thinks this has reached its limits and that we have
entered a period of "financial repression," in which rates are
kept low and economic growth is limited.
In order to deal with this, the Deutsche team said that more aggressive fiscal policy, including serious government spending to build infrastructure, hire people, and grow the economy, is needed.
Now this isn't a new idea. Everyone from hedge fund titans to both leading Presidential candidates have mentioned the need for government investment to kick-start economic growth. The issue almost everyone has cited is legislative pushback and attitudes towards taking on more debt.
http://www.businessinsider.com/deutsche-bank-stock-market-collapse-fiscal-stimulus-2016-8?r=UK&IR=T
Bond yields are hitting record lows while the stock market is hitting record highs. The labor market is signaling full employment, but GDP growth remains lackluster.
According to the fixed income research team at Deutsche Bank, there is a way for these conundrums to work themselves out, but it will take some pain for us to get there.
Specifically, stock market crash pain.
Essentially, Deutsche's fixed income research team argues that many of the issues facing the financial system come from central banks using interest rate cuts, asset purchases, and other monetary policy measures to spur economic growth.
In order to deal with this, the Deutsche team said that more aggressive fiscal policy, including serious government spending to build infrastructure, hire people, and grow the economy, is needed.
Now this isn't a new idea. Everyone from hedge fund titans to both leading Presidential candidates have mentioned the need for government investment to kick-start economic growth. The issue almost everyone has cited is legislative pushback and attitudes towards taking on more debt.
http://www.businessinsider.com/deutsche-bank-stock-market-collapse-fiscal-stimulus-2016-8?r=UK&IR=T
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