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Why Soaring Stocks Could Be Bad News For The Economy

By Abdulazeez KurangaPosted on Posted in Africa & World EconomyTagged , , , , , , , , No Comments on Why Soaring Stocks Could Be Bad News For The Economy

While it’s had some ups and downs, the stock market has soared to historic heights in recent years. For many, that’s great news: it’s a sign that the economy and their retirement accounts are doing really well. For Jan Eeckhout, however, the booming stock market is a sign that there’s something deeply wrong with the economy.

Sure, the economist says, he has a retirement account with stocks, and he personally benefits from the ongoing bonanza on stock exchanges. But the rocket ride of the stock market is powered by the exploding profits of increasingly powerful corporations. Their increasingly ridiculous profits, he says, are eating the income of the vast bulk of workers and hurting the overall economy. That notion is the central thesis of his forthcoming book, The Profit Paradox: How Thriving Firms Threaten the Future of Work.

Monetary Policy at a Crossroad: Policymakers Need to Break Promise of Easy Money to Avoid Boom-Bust

By Okeowo EbenezerPosted on Posted in Business & FinanceTagged , , , , , , No Comments on Monetary Policy at a Crossroad: Policymakers Need to Break Promise of Easy Money to Avoid Boom-Bust

The Federal Reserve’s new policy approach is that policymakers want to see “actual progress, not forecast progress” before deciding to change its policy stance. Substantial actual progress is occurring in the economy, some faster than others. How much monetary accommodation is needed to meet the ultimate employment and inflation objectives is debatable. But it is less than when the pandemic started and less after the passage of $1.9 trillion in federal stimulus.

Determining when a policy stance has become too accommodative is not an easy matter—but enabling excessive risk-taking to become well-entrenched is comparable to past policy mistakes by allowing a build-up of inflation and inflation expectations. Both are difficult to unwind, and past episodes have shown it is impossible without triggering significant adverse effects in the economy.

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