Berkeley professor and economist Barry Eichengreen reconciles the nominal and real interest rates to argue in favor of greater fiscal deficits.

Joseph Corr

2019-05-23 10:33:00 Thu ET

Berkeley professor and economist Barry Eichengreen reconciles the nominal and real interest rates to argue in favor of greater fiscal deficits. French economist and author Thomas Piketty advocates that there is an innate tendency toward wealth concentration in most market economies where the nominal interest rate on capital investments well exceeds the economic growth rate. Former IMF chief economist Olivier Blanchard argues that the real interest rate on risk-free government bonds must be lower than the economic growth rate for most market economies to carry greater government debt with low inflation. Blanchard focuses on the real interest rate on low-risk government bonds, whereas, Piketty focuses on the nominal return on risky capital investments.

These interest rates diverge by a 5%-6% equity risk premium, which reflects how risk-averse the typical stock market investor is through the real business cycle. For Piketty, high wealth concentration can result from a large equity risk premium that calls for higher taxes on the rich. For Blanchard, the government can accumulate higher public debt as core CPI inflation remains moderate over time. On balance, Eichengreen supports greater fiscal deficit finance for health care, infrastructure, R&D, and social security as prices and asset premiums stabilize in recent times.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More
Warwick macroeconomic expert Roger Farmer proposes paying for social welfare programs with no tax hikes.
Jonah Whanau

2019-07-05 09:32:00 Friday ET

Warwick macroeconomic expert Roger Farmer proposes paying for social welfare programs with no tax hikes.

Warwick macroeconomic expert Roger Farmer proposes paying for social welfare programs with no tax hikes. The U.S. government pension and Medicare liabilitie

+See More
Amazon and Google face more intense antitrust scrutiny.
Apple Boston

2019-06-21 13:33:00 Friday ET

Amazon and Google face more intense antitrust scrutiny.

Amazon and Google face more intense antitrust scrutiny. In recent times, Justice Department and Federal Trade Commission have reached an internal agreement

+See More
We need crowdfunds to support our next responsive web design and iOS and Android app development.
Andy Yeh Alpha

2019-01-13 12:37:00 Sunday ET

We need crowdfunds to support our next responsive web design and iOS and Android app development.

We need crowdfunds to support our next responsive web design and iOS and Android app development. Upon successful campaign completion, we will provide an eb

+See More
Agile business firms beat the odds by building faster institutional reflexes to anticipate plausible economic scenarios.
Fiona Sydney

2020-09-03 10:26:00 Thursday ET

Agile business firms beat the odds by building faster institutional reflexes to anticipate plausible economic scenarios.

Agile business firms beat the odds by building faster institutional reflexes to anticipate plausible economic scenarios. Christopher Worley, Thomas Willi

+See More
U.S. and Chinese trade negotiators hold constructive phone talks after Presidents Trump and Xi exchange reconciliatory gestures at the G20 summit.
Joseph Corr

2019-08-04 08:26:00 Sunday ET

U.S. and Chinese trade negotiators hold constructive phone talks after Presidents Trump and Xi exchange reconciliatory gestures at the G20 summit.

U.S. and Chinese trade negotiators hold constructive phone talks after Presidents Trump and Xi exchange reconciliatory gestures at the G20 summit in Japan.

+See More
Business titans often step away from their urgent work, slow down, and invest in self-enrichment.
Laura Hermes

2017-12-23 10:40:00 Saturday ET

Business titans often step away from their urgent work, slow down, and invest in self-enrichment.

Despite having way more responsibility than anyone else, top business titans such as Warren Buffett, Charlie Munger, and Oprah Winfrey often step away from

+See More