The European Central Bank (ECB) replicated the Federal Reserve Bank’s earlier U-turn on monetary policy at its latest meeting. Barely three months after the central bank announcing an end to Quantitative Easing (QE), Mario Draghi, the ECB president, pulled the alarm over the sharp economic slowdown and announced a two-pronged approach. First, the central bank would continue its ultra-low interest rates policy at last through the end of 2019. Second, barely three months after announcing), the ECB will provide continued support to financial markets and banks.
Predicting the future is notoriously difficult, but that doesn’t stop the flurry of prognostications every January. We’ve gathered a selection of 2019 forecasts, including some predicting low probability events, because just imagining the unlikely can reveal horizons sometimes obstructed by conventional wisdom.
Like previous “year ahead” reviews I have published on EconVue, this is not intended as a prediction of how events will necessarily unfold in real life. Instead, as always my intent is above all to consider the main risks to the stability to the international political and economic environment in various regions of the world that I am relatively familiar with.
I normally feel after reading, reviewing, and discussing the events of the previous week that I’m able to discern a direction or constructive theme. Today however, every corner of the world seems mired in some degree of turmoil, and markets are reacting. There is so much noise that it is difficult to decide what is causing this new volatility. Is it China, the Fed, the Mueller investigation, Yellow Jackets, or technology run amuck?
There was a basic flaw in the Vollgeld “sovereign money” proposal rejected by the Swiss in a referendum last Sunday. An arrangement that gives the state or its agencies exclusive power to create money, oversee bank accounts and direct lending to the economy is hostile to capitalism. It cannot produce the assurance needed to allow the process of rational monetary calculation that is the essence of capitalism. This was pointed out by the sociologist Max Weber in 1922. Geoffrey Ingham of Christ’s College Cambridge sums up Weber’s conclusion as follows: