For much of the past two decades, most of the U.S. government debt was stashed away in the vaults of the Federal Reserve, foreign central banks, and private banks that used it as a kind of cash reserve. At the height of the era of low cost money, the Fed was hoarding $100 billion a …
Why High Investment Grade Bonds remain the preferred choice?
Bonds and especially those characterized as high investment grade remain the preferred choice for Trust Economics. With yields trading at multi-year highs – a result of interest rate hikes by central banks – government bonds offer returns far better than any deposit account (even term deposits) while missing the risk of equity investments and commodities. …
Why is the only deposit banking product a deposit, while everything else is an investment?
Borrowing rates may be rising, but deposit rates remain at zero, frustrating depositors who see inflation erode the value of their money. The average interest rate on new loans in the Eurozone was 3.85%. In contrast, the average deposit rate was 1.15%. Any attempts by the Central Banks of the ECB in the member countries …
Recession will solve the problem because anti-inflationary policies have reached their limits
Central banks insist they are not done raising interest rates yet, with inflation still well below the 2% target. The result is that the EKT is currently at the highest interest rates in its history and the FED is at the highest interest rates in 22 years. At the same time, various side effects of …
The Productive Issue of an Economy
In order to see if an economy has entered a long-term path of dynamic development that will inevitably result in its transformation within a few years into a structurally sound and modern economy, we should establish and investigate whether this corresponds to reality by examining its production model for to find out if there is …
How can Wages increase in practice?
Although nominal wages rose sharply in the 1980s, high inflation did not allow for an increase in real terms. Over the past decade, the average real wage has been on an upward trend, but then the Covid-19 pandemic and high inflation created strong pressures on incomes. The growth of economies today supports significant wage growth …
What would a US bankruptcy cause?
The Biden administration has until June 1st, so that the US does not end up in default, which in turn will bring a series of “chain” reactions that will cause a global economic shock. And the reason is very simple: American banks are “loaded” with government bonds and may collapse if the debt ceiling is …
The way of estimating the Nominal value of Public Sector Expenditures
A few days ago, the IMF published a study on the impact of inflation on public finances (“The Effects of Inflation on Public Finances“, May 5, 2023). The Study is based on the data of the member countries of the Fund from 1962 to the present day and comes to two interesting findings: 1. Regarding …
The Real-estate market in turmoil and how the EU & USA is hitting Growth
Investments in real estate are traditionally made with loans, the vast majority of which have a variable interest rate. Rising interest rates increase the cost of servicing loans and consequently reduce or eliminate the profit of the companies that own the properties. Already, internationally, the first effects are being observed, with many large companies that …
Pressure on Emerging Economies from the Overvalued Dollar
The rise of the US currency depletes their limited foreign exchange reserves and stunts growth by making their exports more expensive. The strengthening of the dollar over the past year due to continued interest rate hikes by the US Federal Reserve has put severe pressure on many emerging economies, which have seen their national currencies …