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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

April 2016

  1. Blog post | Tags: Joshua McCallum

    Increasingly extreme monetary stimulus measures are proving remarkably ineffectual at breaking the economy out of the low growth, low inflation cycle. So should central banks simply print money and pass it directly to governments or households? Monetisation may be contentious, but is it any more worse than QE? It could be a more equitable solution. But can our central bankers and politicians be trusted to use it wisely? The experiences of hyperinflation still haunt, and cloud, policy-makers' thinking.

  2. Blog post | Tags: Joshua McCallum

    The function of profits used to be so simple. In part they were used to reward investors short-term, via dividend pay-outs, but in the main they supported capital expenditure to grow the business. Not so today: the incentives driving firms and their CEOs are rather different. The combined consequences of perverse incentives and flaws in the tax system favor debt financing over equity financing, allowing dividends and share buybacks to rise drastically relative to profits. But at what cost?

  3. Blog post | Tags: Joshua McCallum

    In today's global society, the changing seasons might seem almost irrelevant. It is always spring or summer somewhere in the world. But seasonality still plays a surprisingly important part in the calculation of core inflation – surprising being the operative word. This is a supposedly stable measure yet seasonal factors, such as the winter sales, cause an unexpected degree of volatility which markets find hard to take into account.

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.