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Joshua McCallum

Joshua McCallum is Head of Fixed Income Economics at UBS Asset Management, where he provides economic analysis to support and challenge portfolio managers. Before joining UBS in 2005, Joshua worked for the UK Treasury, dealing with an eclectic range of topics including international macroeconomics, the UK budget, economic reform in Europe, and post-conflict fiscal policy in Iraq.

Joshua McCallum recently

May 2016

  1. Blog post | Tags: Joshua McCallum

    Somewhat implausibly, Japanese Prime Minister Shinzo Abe used the platform of last week's G7 meeting to declare that the state of the global economy is as bad as it was in 2009, post-Lehman. None of the key economic indicators support that assertion, so why make such a claim? For Prime Minister Abe, the answer to that question probably lies very close to home, but his preferred solution is unlikely to be met with a resounding chorus of approval further afield.

  2. Blog post | Tags: Joshua McCallum

    The Federal Reserve is not an advocate of mystery – quite the opposite. Its default position is to reveal all to the market, the only problem being that the market's faith in the Fed's revelations is distinctly shaky. And when it comes to monetary policy, one could go as far as to say, the logic of the market is at odds with the logic of the Fed. Maybe the Fed should reveal less and surprise more.

  3. Blog post | Tags: Joshua McCallum

    One of the many paradoxes thrown up by the world of ultra-low interest rates is the disinclination to borrow. Why would borrowers, corporate and household alike, not choose to avail themselves of what would seem to be cheap money? Maybe, the effect of low rates has actually proved to be counterintuitive and just maybe, the effect of an interest rate hike will prove just as unexpected.

Recent charts

Chart 1: Different dosages
Illustrative increases in the stock of money by policy type (EUR or any currency)

Chart 1: Different dosages

Source: UBS Asset Management

Will monetisation have any effect on nominal growth? Firstly, monetisation will only have an effect on nominal growth if it results in more government spending or lower taxes (rather than just reducing the level of debt). Or, if you want to be more revolutionary, monetisation will impact nominal growth if the central bank gives new cash straight to households (although you can see how that is pretty much identical to financing a government tax cut). At these extremes, the distinction between fiscal and monetary policy is blurred.

Economists will argue about almost anything, so it is no surprise that this topic is contentious. Some would argue that if the government runs a bigger deficit today, then people know that their taxes will go up at some point in the future. So any tax cuts today get saved in preparation. This is known as Ricardian equivalence, and it sounds pretty far-fetched. But what if governments have already announced the need for austerity and future tax increases? Any extra government spending today will immediately make people expect more taxation will be needed in the future.