Global economy is 'walking on a tightrope,' economist says
Many economists are pessimistic about the state of the global economy, as the 10-year Treasury note broke below the 2-year rate for the first time in more than a decade in the U.S. and plunging global interest rates may be signaling a looming worldwide recession. Several of those economists provided The Washington Post with their takes on what's going on.
"It seems very fragile at the moment," Torsten Slok, chief economist at Deutsche Bank Securities, told the Post. "We're walking on a tightrope."
Outside of the U.S., the Post reports, 43 percent of bonds are trading at a negative interest rate, which is one of the major reasons for the worried outlook. Those yields have complicated central banks' management of the economy, but raising rates wouldn't necessarily be a quick fix. "If interest rates keep going down, the banks will be under pressure," economist Ashoka Mody, a former International Monetary Fund official said. "If they go up, governments will be under pressure. They're caught in a bit of a pincer."
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
While negative rates don't spell immediate doom, the longterm outlook is somewhat bleak if the situation remains in its current state. "You can survive, quote-unquote, or can live with negative yields for quite some time," economist Claudio Borio, the head of the monetary and economic department at BIS, said. "Indefinitely? It would be very odd to think about that being possible. There would be distortions in the economy. You will have resources in the wrong sectors, in the wrong firms, and therefore productivity and growth will suffer. On top of that, you're likely to have quite a lot of debt out there, which will make it harder for policymakers to raise rates without creating some tensions and problems." Read more at The Washington Post.
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Tim is a staff writer at The Week and has contributed to Bedford and Bowery and The New York Transatlantic. He is a graduate of Occidental College and NYU's journalism school. Tim enjoys writing about baseball, Europe, and extinct megafauna. He lives in New York City.
-
Climate change is driving Indian women to choose sterilization
under the radar Faced with losing their jobs, they are making a life-altering decision
By Theara Coleman, The Week US Published
-
'A great culture will be lost if the EV brigade gets its way'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
Visa and Mastercard agree to lower swipe fees
Speed Read The companies will cap the fees they charge businesses when customers use their credit cards
By Peter Weber, The Week US Published
-
Visa and Mastercard agree to lower swipe fees
Speed Read The companies will cap the fees they charge businesses when customers use their credit cards
By Peter Weber, The Week US Published
-
Reddit IPO values social media site at $6.4 billion
Speed Read The company makes its public debut on the New York Stock Exchange
By Peter Weber, The Week US Published
-
Housing costs: the root of US economic malaise?
speed read Many voters are troubled by the housing affordability crisis
By Peter Weber, The Week US Published
-
Feds cap credit card late fees at $8
speed read The Consumer Financial Protection Bureau finalized a rule to save households an estimated $10 billion a year
By Peter Weber, The Week US Published
-
Immigration helped the US economy outpace peers
speed read The U.S. economy grew at an annualized rate of 3.2% last quarter
By Peter Weber, The Week US Published
-
4-day workweek gets boost from UK study
Speed Read Following a six-month trial, the majority of participating British companies are still using the truncated schedule
By Peter Weber, The Week US Published
-
US sues to block Kroger-Albertsons merger
Speed Read The Federal Trade Commission sued to block the $24.6 billion merger between the grocery giants
By Peter Weber, The Week US Published
-
Nvidia sees historic stock rise on AI chips success
Speed Read U.S. chipmaker Nvidia achieved the biggest one-day increase in value of any company in history
By Peter Weber, The Week US Published