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THE DEBATE ON HIGHER RATES: LET BATTLE COMMENCE

Peter Warburton replies to Robin Marshall's response to his article. I am grateful to Robin Marshall for his comments on my article. I would like to respond to his substantive points, as follows. It is true that real yields on Tips have edged higher, towards 1%, but the real Fed funds rate remains zero, in terms of core CPI inflation, and negative, in terms of headline CPI inflation or producer price inflation. Historically, there has never been a conjunction of real rates at such lows when the... Read More >

Recent Articles:

The debate on higher rates: let battle commence Top economists Peter Warburton and Robin Marshall debate where rates are headed next
Robin Marshall has responded to Peter Warburton's article titled 'What does the flattening yield curve mean'.  The first paragraph ends with a perfectly reasonable question about the information content of a flattening yield curve and whether Read More >
The normalisation that never was…. There may be some factors causing the yield curve to be flatter in this cycle than previously
Despite stronger economic growth in Q2 2018, further Fed tightening and a bearish consensus that US interest rates would go substantially higher in 2018/19, financial markets now signal concern about weaker economic growth and inflation. This is Read More >
What does the flattening yield curve mean? Is this a golden moment to acquire bargain basement long-dated bonds? 
In recent weeks the debate about the significance of the flattening yield curve has reached fever pitch. Does a flat curve spell curtains for the US/UK economic expansion – and by extension, the global economic expansion? Can we hear the Read More >
The economic case for American criminal justice reform With roughly 2.4 million people in prison, the US has the highest incarceration rate in the world
The latest US jobs report showed that the American economy gained 157,000 jobs in July, and the unemployment rate inched down to 3.9 per cent. Meanwhile, the quarterly economic reportshowed the economy growing at 4.1 per cent, the highest Read More >
Smart cities: Smart Real Estate Strategies Understanding the evolution of global cities
With real estate prices at cyclical highs, investors must look to the long term for outperformance. Understanding the evolution of global cities provides the best framework for alpha-generating real estate strategies in the current economic Read More >
How can we spread the benefits of the digital economy? With stagnant wages and low productivity, we need a coordinated response to the digital economy
If there is one thing that the Cambridge Analytica scandal taught us, it’s that politicians are mostly clueless about the political implications tech and social media bring about for society. What went largely unreported is that they also Read More >
Why is growth so slow? An old debate about money has some clues Central bankers could soon find themselves wrongfooted again
The Great Moderation, the period of stable growth between the early-90s and late-2000s, has been back underway again for several years, but with noticeably less momentum. In the US, UK and Eurozone, annual rates of GDP growth of 3 per cent and 4 Read More >
Economics Is Unemotional—And That’s Why It Could Help Bridge America’s Partisan Divide People look down on others more for discordant beliefs on social issues than they do for discordant beliefs on economic issues.
Here is a link to my 68th Quartz column, "Economics is unemotional—and that's why it could help bridge America's partisan divide."    Note: You can see all of my previous Quartz columns listed in order of popularity here. In order to keep Read More >
Market forces can rejuvenate the housing market – if we are bold enough to unleash them Since 1995 average house prices in the UK have risen 300%
Though the ongoing Brexit tussles in Parliament and Brussels have unsurprisingly created something of a policy vacuum, there is perhaps no greater crisis in contemporary British politics than housing. The extent of the problem is truly Read More >
Cities are central to human flourishing Urbanisation makes us richer, happier and healthier
Town versus country may seem like a question of personal preference, but it’s really a matter of human progress. Cities are the engines of human liberation and economic growth. Urbanisation is also good for the planet, for people in the cities Read More >
To solve the cost of living crisis, we must rethink business taxes The burden of business tax falls on workers in lower wages, and consumers in higher prices
Many shops on the high street are struggling to make a profit and business rates are widely identified as one of the main causes of this slump. On Monday, Paul Johnson, the head of the Institute for Fiscal Studies, joined the debate. In a column Read More >
Why the UK’s cost of living is a challenge to free marketeers The rise in the price of basic necessities is a challenge to free marketeers
Across the world, more than a billion people raised out of poverty. At home, a greater array of goods and services than our grandparents could imagine along with cleaner, safer, and frankly more interesting jobs. And now the icing on the Read More >
Time to dispel the Green Belt myths and get Britain building Much of what is designated 'Green Belt' is not very green at all
If the Government ever wants to solve the housing crisis, they need to step up and dispel the Green Belt myth that has become so entrenched within the British psyche. The romanticised notion of a “green and pleasant land” is strangling our Read More >
Sorry, but building more houses won’t affect prices Build more houses by all means – just don't expect prices to go down when you do
Quick question: if I asked you to lend me £10 and then asked you to pay me for borrowing it from you, you’d think I was mad, right? Well this is currently the deal the world is getting when it lends money to Germany over any duration for the Read More >
Healthcare Well Positioned to Hedge Against Downturns U.S. healthcare employment is officially the strongest job generator in the economy.
Employment growth is one of the key indicators of the economic cycle in the U.S. It drops off just ahead of a recession, falls to negative in the trough and bounces back in recovery. Most industries follow this pattern, except for one – Read More >
‘The Value of Everything’ adds up to nothing Strangely, a book called The Value of Everything contains no theory of value
Mariana Mazzucato is a professor of economics at University College London. She came to prominence following the publication of her 2013 book, The Entrepreneurial State, in which she argued for a bigger economic role for the state, claiming that Read More >
You don’t need to own a home to benefit from capitalism Even after the 1930s housing boom, just one in three Britons owned their own home
For some Conservatives, home ownership is a precondition for support for capitalism. But is that really the case? After all, you don’t need to own a farm or a factory to enjoy the benefits of their products. You can do very well in a Read More >
The evidence is clear: government spending means less growth Above a certain level, government spending starts to affect GDP growth
Having agreed a £20 billion “70th birthday present” for the NHS, the Government is now, naturally enough, facing pressure to raise spending in other areas. If Theresa May agrees to raise NHS spending and defence spending, schools will Read More >
Fortune tellers, economists, astrologers, forecasters and other fellow travellers Wanting to forecast and foretell the future is hardwired into our DNA
The Brexit referendum in the UK taught me a great number of different things. The most important one of which is that I never quite realized just how many experts there are out there willing and able to offer an opinion, write a headline, and Read More >
The trouble with Heathrow expansion London already has more airport capacity than any other city in the world
If, as seems very likely, Parliament decides to endorse the Government’s plans to approve the building of a third runway at Heathrow Airport later today, there remains a very good chance that that runway will never actually be built. Indeed, it Read More >
How to tackle Britain’s immigration Hydra Stopping the ban on asylum seekers working would be a welcome immigration reform
If you were to invent an immigration system from scratch, only a lunatic would come up with the bureaucratic mess we have in the UK. Fortunately, new Home Secretary Sajid Javid is reversing some of the damage. First on his hit list was the Tier Read More >
Rents and capital values rise in global real estate – Americas industrial leads Retail rents are easing as the sector reinvents itself
2018 has registered a very healthy start with strong global GDP growth and historically low G7 unemployment rate. The global economy is poised to record the fastest growth (3.1%) in seven years, driven by the turbo charged U.S. economy and Read More >
Economic development is a prerequisite for gender equality When nearly all children survive into adulthood, women undertake paid economic activity
According to the World Bank, the true and proper economic emancipation of women would make the world $160 trillion richer. However, this eye-catching figure gets things the wrong way round, confusing cause and effect. In fact, the correct Read More >
Government loan programmes are failing the most vulnerable students Only 45 percent of post-2016 student borrowers in the UK are expected to repay their loans in full
To extend credit to people in the knowledge that they are unlikely to repay is decried by some as predatory lending. Those suspected of engaging in this practice will face scorn from regulators and opprobrium in the media. Yet predatory is not Read More >
How India’s populist currency experiment went wrong India's currency experiment had more to do with populism than economics
Getting rid of a unit of currency is a step usually only taken in extreme circumstances or after long, careful planning — Zimbabwe’s battle with hyperinflation is an example of the former, the transition to the euro the latter. India’s Read More >
The free market or a welfare state – why not both? Some of the most open and freest markets also have some of the largest welfare states
Politics can often feel like a tug of war between two opposing tribes. On one end, small government conservatives pull society towards free markets and away from the forces of “big government”. On the other, social democrats pull with equal Read More >
The sad story of global inflation Cycles come to an end because central banks raise interest rates to suppress inflation.
Whatever the popular story of the time, the reason that cycles come to an end is that central banks raise interest rates to suppress inflation. Initially, business and consumer confidence prevents interest rates from having an immediate Read More >
A proposal to fix welfare and fight intergenerational unfairness Why not give people pension funds at the start of their adult lives?
The Resolution Foundation recently proposed to introduce a “citizen’s inheritance” of £10,000 in order to offset the growing wealth gap between generations. Free-market advocates did not welcome the report with open arms, and for good Read More >
McDonnell’s profit sharing would put Britain on the path to socialist ruin John McDonnell's recipe for economic disaster
On yesterday’s Sunday Politics, John McDonnell explained his party’s policy on profit sharing. He proposed that businesses should be required to share profits with workers either in the form of bonuses or share distributions. He said he Read More >
The Long Term View How family offices manage their assets
Welcome to this new column in which I will provide readers with an insider’s view of how family offices manage their assets. As a graduate of economics, I have applied my knowledge analysing economic and financial trends and applying it to Read More >
The Rich List is evidence that capitalism isn’t broken 94 per cent of the 1,000 people on the Rich List are self-made
Interesting proof that Thomas Piketty got the modern economy wrong comes from The Sunday Times’s annual rich list, which was published yesterday. Some 94 per cent of the 1,000 people made the cut not by getting rich the old fashioned way — Read More >
What does the British public think about capitalism? 61 per cent think ordinary working people don't get their fair share of the nation's wealth
One fascinating theme when looking across the history of politics in general, and of public opinion in particular, is that the great philosophical debates of one era simply don’t crop up in another. Some of the great ideological clashes of the Read More >
The state of the economy – polling data suggests danger ahead Brexit, interest rates and an economy on a knife-edge
While Q1 2018 was expected to be a quiet one for the UK economy, last week’s news from the ONS that growth has slowed to just 0.1% - the lowest rate in five years – came as an unwelcome reminder of the economy’s vulnerability. Potholes and Read More >
Don’t panic over today’s GDP figures Construction not done in one quarter tends to be caught up later
The ONS published its preliminary estimate for GDP growth in the first three months of 2018. This found that growth that quarter was a stuttering 0.1 per cent. The figure is slower than the already-modest 0.4 per cent growth seen in the last Read More >
The Wembley deal is Global Britain in action The UK needs to demonstrate that it is open for business. The Wembley deal does just that
The news that Wembley Stadium looks like it is about to bought by Shahid Khan, the owner of  NFL team the Jacksonville Jaguars and Fulham FC, has been greeted with dismay by many commentators. It is all part of the narrative which takes issue Read More >
Admit it – planning has failed us The average renter has gone from spending one fifth of their income each year on rent to spending over a third
By anyone’s reckoning Britain faces a housing crisis. We simply do not have enough houses in the places that people want to work and live. Why is our planning system so broken? Well, folks, the clue is in the name: planning. We have tested to Read More >
Why the fall in IPOs is a threat to popular capitalism Start-ups are looking away from the public markets to raise capital
In 1996, at the start of the dot-com boom, the number of initial public offerings (IPOs) in the United States reached 677. This marked the peak of new share offerings on American exchanges. It seems particularly fitting that, at the end of that Read More >
Sustained demand for logistics Prices are just as important as technology and demographics in explaining the shifts between retail and logistics in U.S. real estate markets
U.S real estate is having ‘a good cycle’. It is a long one by any standards.  We are also seeing shifts between sectors. Single family homes have given way to apartments; but the way in which the retail has ceded ground to industrial and Read More >
Ricardo’s ideas are as indispensable today as they were 200 years ago David Ricardo understood that wealth isn't a zero-sum game
The 19th of April was David Ricardo’s birthday. Or at least it would have been were he still alive. The classical economist has been dead for nearly 200 years, but his insights and theories remain immeasurably valuable today. Yet Ricardo was, Read More >
How far can interest rates rise? How far should interest rates rise? Brexit is as irrelevant to the MPC’s task as the phases of the moon
I’ve just been listening to a radio interview with Mark Carney, governor of the Bank of England, in which he prevaricated endlessly about whether UK Bank Rate was going to rise. Not specifically in May, but at all. Since taking on the role in Read More >
The problem with central bankers’ inflation preoccupation A preoccupation with inflation deepened the last recession
In recent years, a growing number of prominent economists, including Michael Woodford, Christina Romer and Larry Summers, have switched their allegiance from inflation targeting to targeting nominal GDP, the non-inflation-adjusted sum of all Read More >
Urban Big Data and Real Estate Markets Analysing real estate through big data
Most real estate value is created at the urban level, but some of the most expensive cities in the world are the least well-functioning.  So, it does not follow that improvements in the ways cities are run will flow directly into increased real Read More >
A house roof with two dormer windows and the sun shining between them What Tokyo can – and can’t – teach us about the housing crisis With 100,000 new dwellings a year, Tokyo’s housing stock has kept pace with its population
Be more like Japan. That is the takeaway from a Bloomberg column by the always-interesting Noah Smith. His is the latest article to look at Tokyo’s approach to housing for answers to the spiralling cost of homes in comparable Western Read More >
New taxes are no way to reduce generational inequality There is a cost of living crisis; cutting taxes for those working is the best solution
Lord Willetts today gave a speech at the Resolution Foundation calling for wealth taxes to be imposed on the baby boomer generation in order to fund their health and social care in old age and to prevent the burden being placed on younger Read More >
London skyline from the River Thames Why the Bank of England should scrap its inflation target Targeting Nominal GDP would provide a reliable monetary policy in good times and bad
Fifty years have passed since Milton Friedman delivered his groundbreaking American Economic Association Presidential address on the role of monetary policy. Unfortunately, many of Friedman’s insights are neglected today. Friedman demolished Read More >
Pile of bitcoins Which is a better bet: Bitcoin or the dollar? Buying Bitcoin is nothing more than a bet on its future value
Keeping your funds in cash is generally viewed as much safer than holding them in stocks. This is because, on any given day, the value of the US and UK capital stock – as measured by the NYSE and FTSE indices – can easily fluctuate by one or Read More >
US dollars on a wooden table The most important chart in the world? This chart suggests that investors should reallocate to residential property
In 2005, futurist Ray Kurzweil shocked the world with his book, The Singularity is Near. He speculated that around the year 2045, the Singularity, which is to say a humanity which has merged with technology, will turn artificial intelligence (AI) Read More >
Close up detail of banknote Beware the unannounced interest rate increase Economist Peter Warburton explains the relationship between central banks and interest rates
Central banks do not set interest rates. To be specific, central banks in large western democracies with open capital markets and flexible exchange rates do not set interest rates, other than for overnight money. That’s right! If Read More >

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