Liquidity Trap

During the Great Recession, many central banks reduced their interest rates to historically low levels. However, the interest rate was good to be its zero point, it remained higher than the natural rate, that is to say, the nominal interest rate which closes the output gap and ensure price stability. However, once the zero lower bound is reached, the central bank may further cut its key interest rate, which exposes the economy to deflationary pressures and an increase in its unemployment rate. In such a situation called liquidity trap, where monetary policy is proving excessively restrictive fiscal authorities must necessarily intervene to counteract deflationary pressures. The finance managers adopt their next steps "unconventional" to make them more effective monetary policy. However, the Great Recession is different from previous episodes of liquidity trap, including the lost decade in Japan, that the phenomenon of liquidity trap this time has a global dimension. The United States, UK and the other Euro countries are the countries most closely linked by trade and financial linkages that have experienced the largest slowdown in crisis, bringing their monetary authorities to fix the interest rate to the nearest zero.
According to famous Economist, the appearance of liquidity traps in a context where markets for goods, services and capital are integrated internationally gives a new dimension to the dilemma highlighted by the literature in finance International (also called "impossible trinity" or "impossible trinity"). The traditional interpretation of this phenomenon, a country cannot simultaneously ensure the opening of capital markets, fixed exchange rates and monetary policy autonomy. If achieved two goals, the third becomes unattainable. However, even if the exchange rate is flexible and fully opens capital markets, monetary policy loses its effectiveness in a liquidity trap. If the domestic economy is a powerful external shock depressing domestic demand, the zero lower bound is likely to constrain its own monetary policy. Financial markets play a key role in the spread of the phenomenon of liquidity trap a country to another.
The economic literature have suggested that the introduction of capital controls to reduce the risk that a country will suffer destabilizing capital inflows: inflows are indeed likely to fuel an unsustainable credit expansion, the formation of bubbles assets and excessive currency appreciation, especially in emerging countries. The introduction of capital controls makes monetary policy more effective in reducing the risk that the economy switches into a liquidity trap.

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Aggressive stimulus efforts by Abe given strong boost to Japan

The expected increase of 3.6% after 4.1% annualized GDP and the private consumption expected to have risen 0.5% Reversal expected business investment. The growth of the Japanese economy is expected to reach 3.6% annualized in April-June, a Reuters survey showed a third consecutive quarter of expansion that would reflect the impact of increasing net policies "reflationary" Prime Minister Shinzo Abe. The figure released on Monday morning in Tokyo should also strengthen the government's desire to raise the VAT next year, even if the implementation of this project politically sensitive involves many other factors, economists note. The second quarter should certainly have marked a slight slowdown in growth after the 4.1% annualized from January to March, driven mainly by household consumption, but the April-June statistics should show a recovery in exports and business investment, they add. "The growth is balanced with a strong domestic demand and external demand. This is a sign that the impact of political Abe is becoming wider," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo. Compared to the first quarter, gross domestic product (GDP) is expected to have risen 0.9% in April-June, foreign demand are contributing 0.2 shows the Reuters survey.

Private consumption is expected to grow by 0.5% a quarter to the next, which would mark a slowdown after growth of 0.9% in January-March. But business investment, which fell by 0.3% in the first three months of the year, is expected to rebound by 0.7%. Abe's government plans to raise the VAT rate of 5% to 8% in April and 10% in October 2015, as part of efforts to try to contain the public debt, which exceeds 200% of GDP, the highest ratio of the major industrialized countries. This doubling in a year and a half, which is the most ambitious reform of the Japanese taxation engaged for decades, obviously poses risks to the consumer and more broadly for the recovery, as it may curb spending. Abe said he would adopt in the fall a final decision on the matter, in particular according to the changing conditions. Until then, it will be especially aware of the revised second quarter GDP, which is scheduled for publication on September 9. A Reuters survey shows that most private sector economists are in favor of raising the VAT according to the original schedule, considering that the economy can now absorb the impact.

On Monday, the International Monetary Fund (IMF) has called Tokyo to implement the project, considering it was a "necessary first step" to solve the fiscal problems of Japan. But even if GDP figures are as strong as expected and confirmed next month, Shinzo Abe will take a decision after studying the findings of several studies it has commissioned on the expected impact of the reform explain several sources. Careful, the prime minister also asked his staff to consider alternatives to this reform. "A good GDP figures could reinforce the scenario of a VAT increase in the initial project. But the final decision rests with Abe and he alone, “said Yoshiki Shinke. "It will be more important than past GDP figures is how the economy will react if VAT increases indeed. At this stage, it is very difficult to predict."

Strong and sustainable growth for the luxury industry in Asia!

Asia as a whole is the heaven for the future of luxury industries more than ever. According to the economist’s views the economic crisis has little effect in the luxury industry throughout the world. For one simple reason: in the crisis, the poor get poorer, but the rich get richer, and the consumption of products they love increases because they have more resources to buy them, while general consumption stagnates or declines. In Europe, sales of luxury goods is expected to increase by more than 6% in 2013, while overall consumption stagnates, the United States will increase by more than 9% worldwide, 10% alone in Asia, excluding China and Japan, the increase in the sale of luxury goods is expected to be 15% and China at 20%, well beyond the expected GDP growth of 7%. This amazing forecast of 20% growth for luxury goods in China was announced on June 11 in Hong Kong by an luxury goods analyst at HSBC bank, in a speech entitled "The influence of China emerging market for luxury goods in Asia, "the French Chamber of Commerce in Hong Kong. Asia, excluding China and Japan, is currently the site of half the growth of sales of luxury goods in the world. The Chinese take an even more important in this area. 75% of revenues from the sale of luxury goods in Hong Kong and Macau are made by mainland Chinese. They are more likely to make the trip to Hong Kong and Macao, as well as Taiwan and Singapore, where they buy luxury goods. When a Chinese travel abroad, he spends an average of 875 Euros in products like branded watches and wine for men, jewelry and readymade garments for women.. No doubt he will reckon with the effect of campaigns by the Chinese authorities against corruption and for a lifestyle of modest appearance. But it seems that for the time being, this effect is limited to only a little lower the price level of goods bought - a watch 4 000 and not more than 10 000 - and especially to moderate the exhibition luxury. The affluent Chinese still want luxury, but a more discreet luxury. To say that the Europe has its part to play in this game and she plays so well. It is further necessary that the luxury industries are not disabled by retaliation against the Customs anti-dumping measures against Chinese solar panels.

The Future Economic Rebalancing Of The World

In 2017, no European country will be included in the top ten contributors to global economic growth. The emerging economies will account for fifty percent of global production of goods and services. According to IMF, in the year 2018 the proportion will increase to 55%. And this is only the continuation of a trend that began there more than thirty years and represents a consolidation in the global economic consequences. As noted by the chief economist of Goldman Sachs who invented the concept and acronym BRIC's in the 1980s when the growth of the Chinese economy was even more important today, a growth rate of China's economy 10% was less important to the world that U.S. growth by 1%. In 2013, the rates of equivalence are 8% and 4%. Today, financial markets are equally concerned of China slowdown as the U.S. recovery. No wonder that, as growth in emerging was much stronger than the rest of the world, and that their standard of living per capita has steadily catching up with the seven most industrialized countries. By the mid-1990s, countries such as Germany and Italy had dropped from the list of top ten countries with the highest growth rates. While in the 1980s, the United States accounted for 30% of global growth and Europe 20%; in 2017 no European country will included in the top ten contributors to global growth. Europe as a whole no longer and will contribute only 6% of it, while India and China will contribute to almost 50%. Even more surprising is the speed at which occurs rebalancing and this because of the masses in. The economic transformation and urbanization of China occur at a scale with the population is one hundred times greater than that of Great Britain at its early industrialization and a speed ten times. Thus the Chinese momentum is 1000 times that of Britain 200 years ago. This rebalancing is a return to the state of the world that existed in the early nineteenth century. But this is only small consolation because it is perceived as a stall and undoubtedly contributes to the gloom in US, as in the rest of Europe.