Tue, Mar 19, 2024
A A A
Welcome Guest
Free Trial RSS pod
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other voices: Global negative interest rates, what can go wrong and how can hedge funds help?

Thursday, September 05, 2019

By: Donald A. Steinbrugge, CFA - Founder and CEO, Agecroft Partners

Globally coordinated monetary stimulus prevented a potential economic meltdown in 2008 and helped create a quick rebound in the capital markets. We have since seen the longest economic expansion on record. Unfortunately, the effectiveness of monetary stimulus declines the more it is used. Ideally, it should only be used during recessions in order to reduce a downturn's severity and duration.

Recessions are a natural occurrence in an economic cycle. They are unpleasant when they occur, but can be helpful to the economy in the long term. Recessions drive out inefficient companies and capital is recycled into growing parts of the economy. The longer recessions are artificially delayed, the more severe they may ultimately become. Unfortunately, many governments have over used monetary policy, creating approximately $17 trillion of sovereign debt yielding a negative interest rate. This can be easily conceptualized by viewing the chart below, where we have substituted the word yield with the more appropriate word, expense.

Not only is monetary easing now having little impact in stimulating these economies, but it is significantly increasing the potential severity of a future recession. Overuse has effectively eliminated one of the major tools available to simul......................

To view our full article Click here

Previous Opalesque Exclusives                                  
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. KKR raises $6.4bn for the largest pan-Asia infrastructure fund[more]

    Laxman Pai, Opalesque Asia: The New York-based global investment firm KKR has raised a record $6.4bn for its second Asia-focused infrastructure fund, underlining investors' continued appetite for private markets. According to a media release from the alternative assets manager, the figure top

  2. Bucking the trend, top hedge fund makes plans for a second SPAC[more]

    From Institutional Investor: SPACs aren't dead. At least not to the folks at Cormorant Asset Management. The life sciences firm, whose hedge fund topped its peers in 2023, is confident it will match the success of its first blank-check company. Last week, the life sciences and biopharma speciali

  3. Benefit Street Partners closes fifth fund on $4.7 billion[more]

    Bailey McCann, Opalesque New York: Benefit Street Partners has closed its fifth flagship direct lending vehicle, BSP Debt Fund V, with $4.7 billion of investable capital across the strategy. Benefit Street invests primarily in privately originated, floating rate, senior secured loans. The fun

  4. 4 hedge fund themes that are working in 2024[more]

    From The Street: A poor earnings report from Tesla (TSLA) has not hurt the indexes on Thursday. The decline in Tesla stock, which is losing its position in the Magnificent Seven pantheon, is more than offset by strong earnings from IBM (IBM) and ServiceNow (NOW) . In addition, the much higher-t

  5. Opalesque Exclusive: A global macro fund eyes opportunities in bonds[more]

    Bailey McCann, Opalesque New York for New Managers: Munich-based ThirdYear Capital rebounded in 2023, following a tough year for global macro. The firm's flagship ART Global Macro strategy finished the year up 1