The rise in the Euro area money supply looks permanent and therefore inflationary

Today out focus switches to the Euro area and the European Central Bank. We cam open with yet another failure for economics 101 as a surge in the money supply is supposed to lead to a weaker currency.Yet last year ended with Bloomberg reporting this.

The European Central Bank is closely monitoring the euro’s strengthening against the U.S. dollar, Governing Council member Olli Rehn says

Regular readers will recall that what used to be called jawboning but these days are called open mouth operations began around 1.18 versus the US Dollar and we are now at 1.2275 as I type this. So we see that even adding the vocal weapon to the money printing I will come to in a moment is not stopping the Euro’s rise.This matters because with so many commodities priced in US Dollars it reduces inflation in the Euro area which the ECB is desperately trying to increase.

We can also look at this via the trade-weighted or effective exchange rate.It is hard not to have another wry smile in the direction of economics 101 as the QE and negative interest-rate era of the ECB has coincided with a Euro rally. It bottomed around 101 in April 2015 and is now at 123. For our immediate purposes the recent move started at 112.6 on the 18th of February. If we try to ignore the excitement back then we have seen a move from 114 to 123 which we know what to do with.

Now, as a rule of thumb, each 10% permanent effective exchange rate appreciation lowers inflation by around 40 to 50 basis points. ( The Draghi Rule)

So around a 0.4% fall in inflation from this source.

Soaring Money Supply

This morning has brought a new record.

Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, increased to 14.5% in November from 13.8% in October. (ECB)

This compares to a pre pandemic growth rate of 8% or so showing how much of an effort the ECB has put into this. There was an 115 billion Euro increase in November of which some 13 billion was for currency in circulation. That is another arrow in the eye for those who predict the demise of cash because whilst there are perfectly good reasons for using it less right now the reality is that it is expanding. The M1 measure now totals so 10.1 trillion Euros.

Broad Money

Unsurprisingly after the news above this has also moved higher.

Annual growth rate of broad monetary aggregate M3 increased to 11.0% in November 2020 from 10.5% in October.

Indeed as we break it down we see that the increase was narrow money driven.

Looking at the components’ contributions to the annual growth rate of M3, the narrower aggregate M1 contributed 9.9 percentage points (up from 9.5 percentage points in October), short-term deposits other than overnight deposits (M2-M1) contributed 0.3 percentage point (down from 0.4 percentage point) and marketable instruments (M3-M2) contributed 0.7 percentage point (as in the previous month).

This will be disappointing for the ECB as all the effort is to also get the M2 and M3 components rising but in November they outright declined. The M1 push of 115 billion Euros saw only a 104 billion rise in M3.

There is another way of looking at this but I caution against relying on it too much as when it was used as a policy in the UK for £M3 it failed.

As a reflection of changes in the items on the monetary financial institution (MFI) consolidated balance sheet other than M3 counterparts of M3, the annual growth rate of M3 in November 2020 can be broken down as follows: credit to general government contributed 7.7 percentage points (up from 7.3 percentage points in October), credit to the private sector contributed 5.1 percentage points (down from 5.2 percentage points), longer-term financial liabilities contributed 0.7 percentage point (up from 0.3 percentage point), net external assets contributed -0.2 percentage point (down from 0.1 percentage point), and the remaining counterparts of M3 contributed -2.3 percentage points (up from -2.5 percentage points).

The push from the government sector does look genuine though.

Is this about to be permanent?

There are various issues around velocity from the above but also how permanent this is? The latter arises because central bankers regularly state that they can reduce the money supply as easily as they boost it. I mean here that they state it because you see there is rather a shortage of examples of them actually doing it. So as you can imagine topics like the one below in a Financial Time opinion piece catch my eye.

In Europe, soaring debt has led some senior Italian officials to ask the European Central Bank to ease debt burdens by forgiving sovereign bonds it owns. That proposal was quickly dismissed by Christine Lagarde and other central bankers and economists.

We looked at this last year and I noted both Lagarde’s shocking track record and the fact that these things are always denied and then somehow find their way onto thw policy action sheet. Well let;s continue with the FT piece.

Their rapid rejection of debt cancellation as part of the recovery from the pandemic misses one very obvious fact. In a world where a lot of sovereign debt is being bought by central banks, intrinsically, all we are doing is allowing the left hand of the government to owe the right hand of the government a lot of money. At some point they could just shake hands and throw the debt away.

They could but the explanation then gets very confused.

For any country bold enough to consider such extreme action, there may also be a first-mover advantage, because the moment this takes place, borrowing costs should go up. I hasten to add that if a country does go down this route, safeguards are needed. Ideally the government would enshrine in its constitution that this is a one-off emergency response. It cannot continue to print money whenever it wants to do something.

If we look at a country which cancels a lot of debt why would its borrowing costs rise? He must be assuming the central bank stops any future QE but why should it when in the immortal words of the apochryphal civil servant Sir Humphrey Appleby “It has worked so well”?

How many “one-offs” have been repeated in the credit crunch era? Let me make the job easier for you by instead asking how many have not?

Also I am not sure where this is going as even before the credit crunch more than a few broke these rules.

Many EU countries have already breached the bloc’s fiscal rules on debt levels and there is little room for manoeuvre. Debt cancellation needs to be an option in the toolkit.

Comment

We have been observing a monetary push for some time now but we now see a major change and a nuance. The major change is that something I have been pointing out from the beginning is that the money supply boost will be permanent. In the debt cancellation narrative above the increased money supply is left standing. The first casualty is the truth as we have been lied to on a grand scale.

Next comes another lie which is the measurement of inflation. The official measure which we in the UK call CPI but which more formally is called HICP is designed to avoid the consequent inflation. For example it completely ignores the owner-occupied housing sector in spite of the ECB admitting that housing can be a third of all personal expenditure. Why might that be?

House prices rose by 5% in the euro area (EA19) and by 5.2% in the EU27 in the second quarter of 2020 compared with the same quarter of the previous year.

Next comes the nuance which is in fact important. The narrow money growth is money supply but broad money growth relies in fact on demand and we can see that demand for loans is not going so well. Such demand as there is comes unsurprisingly from governments.

The annual growth rate of credit to general government increased to 21.4% in November from 20.3% in October, while the annual growth rate of credit to the private sector stood at 4.8% in November, compared with 4.9% in October.

Can the Bank of England pull UK house prices out of the bag again?

Whilst the UK was winding up for a long weekend the Governor of the Bank of England was speaking about his plans for QE ( Quantitative Easing) at the Jackson Hole conference. He said some pretty extraordinary stuff in a somewhat stuttering performance via videolink. Apparently it has been a triumph.

So what is our latest thinking on the effects of QE and how it works? Viewed from the depth of the Covid
crisis, QE worked effectively.

Although as he cannot measure it so we will have to take his word for it.

Measuring this effect precisely is of course hard, since we cannot easily identify what the counterfactual would have been in the absence of QE.

He seems to have forgotten the impact of the central bank foreign exchange liquidity swaps of the US Federal Reserve. By contrast we were on the pace back on the 16th of March.

But QE clearly acted to break a dangerous risk of transmission from severe market stress to the macro-economy, by avoiding a sharp tightening in financial conditions and thus an increase in effective interest rates.

The next bit was even odder and I have highlighted the especially significant part.

QE is normally thought to work through a number of channels: including signalling of future central bank
intentions and thus interest rates; so called ‘portfolio balance’ effects (i.e. by changing the composition of
assets held by the private sector); and improving impaired market liquidity.

As he has cut to what he argues is the “lower bound” for UK interest-rates how can he be signalling lower ones? After all that would take us to the negative interest-rates he denies any plans for.

Fantasy Time

Things then took something of an Alice In Wonderland turn. Before you read this next bit let me remind you that the Bank of England started QE back in 2009 and not one single £ has ever been repaid.

First, a balance sheet intervention aimed solely at market
functioning is likely to be more temporary, in terms of the duration of its need to be in place.

Also the previous plan if I credit it with being a plan was waiting for this.

and once the Bank Rate
had risen to around 1.5%, thus creating more headroom for the future use of Bank Rate both up and down.

Whilst it was none too bright ( as you force the price of the Gilts held down before selling them) it was never going to be used. This was clear from the way Nemat Shafik was put in charge of this as you would never give her that important a job. Even the Bank of England eventually had to face up to her competence and she left her role early to run the LSE. This meant that she was part of the “woman overboard” problem that so dogged the previous Governor Mark Carney.

The new plan for any QE unwind is below.

We need to work through what lessons this may have for the appropriate future path of central bank balance sheets, including the pace and timing of any future unwind of asset
purchases.

How very Cheshire Cat.

“Alice asked the Cheshire Cat, who was sitting in a tree, “What road do I take?”

The cat asked, “Where do you want to go?”

“I don’t know,” Alice answered.

“Then,” said the cat, “it really doesn’t matter, does it?”

The only real interest the Governor has here is in doing more QE and he faces a potential limit ( if we did not know that we learn it from his denial). So he thinks that one day he may unwind some QE so he can do even more later. For the moment the limit keeps moving higher as highlighted by the fact that the UK issued another £7.4 billion of new bonds or Gilts last week alone.

Today’s Monetary Data

Let me highlight this referring to the Governor’s speech. He tells us that QE has been successful.

The Covid crisis to date has demonstrated that QE and forward guidance around it have been effective in a
particular situation.

Meanwhile borrowers faced HIGHER and not LOWER interest-rates in July

The interest rate on new consumer credit borrowing increased 22 basis points to 4.64% in July, while rates on interest-charging overdrafts increased 1.6 percentage points to 14.84%.

This issue is one which is a nagging headache for Governor Bailey this is because he had the same effect in his previous role as head of the Financial Conduct Authority. It investigated unauthorised overdraft rates in such a way they have risen from a bit below 20% to 31.63% in July. Some have reported these have doubled so perhaps the data is being tortured here.There is a confession to this if you look hard enough.

Rates on interest-charging overdraft rose by 1.6 percentage points to 14.84% in July. Between April and June, overdraft rates have been revised up by around 5 percentage points due to changes in underlying data.

Oh and just as a reminder the FCA was supposed to be representing the borrowers and not the lenders.

QE

As the Governor trumpets his “to “go big” and “go fast” decisively” action we see a clear consequence below.

Private sector companies and households continued increasing deposits with banks at a fast pace in July. Sterling money (known as M4ex) rose by £26.3 billion in July, more than in June (£16.8 billion), but less than average monthly increase of £53.4 billion between March and May. The increase in July is strong relative to the £9.4 billion average of the six months to February 2020.

This means that annual broad money growth ( M4) is at a record of 12.4%. Care is needed as I can recall a previous measure ( £M3) so the history is shorter than you might think. But there has been a concerted effort by the Bank of England to sing along with Andrea True Connection.

(More, more, more) How do you like it? How do you like it?
(More, more, more) How do you like it? How do you like it?
(More, more, more) How do you like it? How do you like it?

Or perhaps Britney Spears.

Gimme, gimme more
Gimme more
Gimme, gimme more
Gimme, gimme more
Gimme more

Consumer Credit

The sighs of relief out of the Bank of England were audible when this was released.

Net consumer credit borrowing was positive in July, following four months of net repayments (Chart 2). An additional £1.2 billion of consumer credit was borrowed in July, around the average of £1.1 billion per month in the 18 months to February 2020.

Although there is still this to send a chill down its spine.

 Net repayments totaled £15.9 billion between March and June. That recent weakness meant the annual growth rate remained negative at -3.6%, similar to June and it remains the weakest since the series began in 1994.

Comment

Quite a few of my themes have been in play today. For example QE looks ever more like a “To Infinity! And Beyond!” play. Governor Bailey confirms this by repeating the plan for interest-rates. They were only ever raised ( and by a mere 0.25% net in reality) so they could cut them later. So QE will only ever be reduced ( so far net progress is £0) so that they can do more later. He does not mention it but any official interest-rate increase looks way in the distance although as we have noticed the real world does see them. That was my first ever theme on here.

Next let me address the money supply growth. The theory is that it will in around 2 years time boost nominal GDP by the same amount. We therefore will see both inflation and growth. That works in broad terms but we have learnt in the past that the growth/inflation split is unknown as are the lags. Also of course which GDP level do we start from? I can see PhD’s at the Bank of England sniffing the chance to produce career enhancing research but for the rest of us we can merely say we expect inflation but much of it may end up here.

House prices at the end of the year are expected to be 2% to 3% higher than at the start.

The annual rate of UK house price growth slowed to 2.5% in July, from 2.7% in June. ( Zoopla )

I find that a little mind boggling but unlike central banking research we look at reality on here.

Finally let me cover something omitted by the Governor and many other places. This is the strength of the UK Pound £ which has risen above US $1.34. Whilst US Dollar weakness is a factor it is also now above 142 Yen ( and the Yen has been strong itself). I would place a quote from the media if I could find any. In trade-weighted terms from the nadir just below 73 as the crisis hit it will be around 79 at these levels. Or if you prefer the equivalent according to the old Bank of England rule of thumb is a 1.5% rise in Bank Rate. Perhaps nobody has told the Governor about this…..

Podcast

 

 

The UK sees some welcome lower consumer,producer and even house price inflation

Today we complete a 3 day sweep which gives us most of the UK economic data with the update on inflation. Actually the concept of “theme days” has gone overboard with Monday for example giving us way too much information for it to be digested in one go. Of course the apocryphal civil servant Sir Humphrey Appleby from Yes Prime Minister would regard this as a job well done. Actually in this instance they may be setting a smokescreen over good news as the UK inflation outlook looks good although of course the establishment does not share my view of lower house price growth.

The Pound

This has been in a better phase with the Bank of England recording this in its Minutes last week.

The sterling exchange rate index had increased by around 3% since the previous MPC meeting

If they followed their own past rule of thumb they would know that this is equivalent to a 0.75% Bank Rate rise or at least used to be. Then they might revise this a little.

Inflationary pressures are projected to lessen in the near term. CPI inflation remained at 1.7% in September
and is expected to decline to around 1¼% by the spring, owing to the temporary effect of falls in regulated
energy and water prices.

As you can see they have given the higher value of the UK Pound £ no credit at all for the projected fall in inflation which really is a case of wearing blinkers. The reality is that if we switch to the most significant rate for these purposes which is the US Dollar it has risen by around 8 cents to above US $1.28 since the beginning of September. Actually at the time of typing this it may be dragged lower by the Euro which is dicing with the 1.10 level versus the US Dollar but I doubt it will be reported like that.

For today’s purposes the stronger pound may not influence consumer inflation much but it should have an impact on the producer price series. This was already pulling things lower last month.

The growth rate of prices for materials and fuels used in the manufacturing process was negative 2.8% on the year to September 2019, down from negative 0.9% in August 2019.

Oil Price

The picture here is more complex. We saw quite a rally in the early part of the year which peaked at around US $75 for Brent Crude in May. Then there was the Aramco attack in mid=September which saw it briefly exceed US $70. But now we are a bit below US $62 so there is little pressure here and if we add in the £ rally there should be some downwards pressure.

HS2 and Crossrail

If you are looking for signs of inflation let me hand you over to the BBC.

A draft copy of a review into the HS2 high-speed railway linking London and the North of England says it should be built, despite its rising cost.

The government-commissioned review, launched in August, will not be published until after the election.

It says the project might cost even more than its current price of £88bn.

According to Richard Wellings of the IEA it started at £34 billion. Indeed there also seems to be some sort of shrinkflation going on.

These include reducing the number of trains per hour from 18 to 14, which is in line with other high-speed networks around the world.

Here is the Guardian on Crossrail.

Crossrail will not open until at least 2021, incurring a further cost overrun that will take the total price of the London rail link to more than £18bn, Transport for London (TfL) has announced.

According to the Guardian it was originally budgeted at £14.8 billion.

If we link this to a different sphere this poses a problem for using low Gilt yields to borrow for infrastructure purposes. Because the projects get ever more expensive and in the case of HS2 look rather out of control, How one squares that circle I am not sure.

Today’s Data

This has seen some welcome news.

The Consumer Prices Index (CPI) 12-month inflation rate was 1.5% in October 2019, down from 1.7% in September 2019.

Both consumers and workers will welcome a slower rate of inflation and in fact there were outright falls in good prices.

The CPI all goods index is 105.6, down from 106.0 in September

The official explanation is that it was driven by this.

Housing and household services, where gas and electricity prices fell by 8.7% and 2.2%, respectively, between September and October 2019. This month’s downward movement partially reflected the response from energy providers to Ofgem’s six-month energy price cap, which came into effect from 1 October 2019……Furniture, household equipment and maintenance, where prices overall fell by 1.1% between September and October this year compared with a fall of 0.1% a year ago.

That is a little awkward as the official explanation majors on services when in fact it was good prices which fell outright. Oh dear! On the other side of the coin have any of you spotted this?

The only two standout items were women’s formal trousers and branded trainers.

Perhaps more are buying those new Nike running shoes which I believe are around £230 a pair.

There was an even bigger move in the RPI as it fell by 0.3% to 2.1% driven also by these factors.

Other housing components, which decreased the RPI 12-month rate relative to the CPIH 12-month rate by 0.05 percentage points between September and October 2019. The effect mainly came from house depreciation………Mortgage interest payments, which decreased the RPI 12-month rate by 0.08 percentage points between September and October 2019 but are excluded from the CPIH

Regular readers will know via the way I follow Gilt yields that I was pointing out we would see lower interest-rates on fixed-rate mortgages for a time. Oh and if you look at that last sentence it shows how laughable CPIH is as an inflation measure as it blithely confesses it ignores what are for many their largest payment of all.

House Prices

There was more good news here as well.

UK average house prices increased by 1.3% over the year to September 2019, unchanged from August 2019.

So as you can see we are seeing real wage growth of the order of 2% per annum in this area which is to be welcomed. Not quite ideal as I would like 0% house price growth to maximise the rate of gain without hurting anyone but much better than we have previously seen. As ever there are wide regional variations.

Average house prices increased over the year in England to £251,000 (1.0%), Wales to £164,000 (2.6%), Scotland to £155,000 (2.4%) and Northern Ireland to £140,000 (4.0%).London experienced the lowest annual growth rate (negative 0.4%), followed by the East of England (negative 0.2%).

Comment

The “inflation nation” which is the UK has shifted into a better phase and I for one would welcome a little bit of “Turning Japanese” in this area. However the infrastructure projects above suggest this is unlikely. But for now we not only have a better phase more seems to be on the horizon.

The headline rate of output inflation for goods leaving the factory gate was 0.8% on the year to October 2019, down from 1.2% in September 2019…..The growth rate of prices for materials and fuels used in the manufacturing process was negative 5.1% on the year to October 2019, down from negative 3.0% in September 2019.

As I pointed out yesterday this will provide a boost for real wages and hence the economy. It seems a bit painful for our statisticians to admit a stronger £ is a factor but they do sort of get there eventually.

All else equal a stronger sterling effective exchange rate will lead to less expensive inputs of imported materials and fuels.

Meanwhile let me point out that inflation measurement is not easy as I note these which are from my local Tesco supermarket.

Box of 20 Jaffa Cakes £1

Box of 10 Jaffa Cakes £1.05

2 packets of Kettle Crisps £2

1 packet of Kettle Crisps £2.09

Other supermarkets are available…..

 

 

Are negative interest-rates becoming a never ending saga?

Today brings this subject to mind and let me open with the state of play in Switzerland.

The Swiss National Bank is maintaining its expansionary
monetary policy, thereby stabilising price developments
and supporting economic activity. Interest on sight
deposits at the SNB remains at – 0.75% and the target
range for the three-month Libor is unchanged at between
– 1.25% and – 0.25%.

As you can see negative interest-rates are as Simple Minds would put it alive and kicking in Switzerland. They were introduced as part of the response to a surging Swiss Franc but as we observe so often what are introduced as emergency measures do not go away and then become something of a new normal. It was back on the 18th of December 2014 that a new negative interest-rate era began in Switzerland.

The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange rate.

Actually the -0.25% official rate lasted less than a month as on the 15th of January 2015 the minimum exchange rate of CHF 1.20 per euro was abandoned and the official interest-rate was cut to -0.75% where it remains.

Added to that many longer-term interest-rates in Switzerland are negative too. For example the Swiss National Bank calculates a generic bond yield which as of yesterday was -0.26%. This particular phase of Switzerland as a nation being paid to borrow began in late November last year.

The recovery

The latest monthly bulletin tells us this.

Jobless figures fell further, and in February the
unemployment rate stood at 2.4%.

There was a time when this was considered to be below even “full employment” a perspective which has been added to this morning and the tweet below is I think very revealing.

If we look at the Swiss economy through that microscope we see that in this phase the unemployment rate has fallen by 1%. Furthermore we see that not only is it the lowest rate of the credit crunch era but also for much of the preceding period as it was back around the middle of 2002.

So if we look at the Swiss internal economy it is increasingly hard to see what would lead to interest-rates rising let alone going positive again. This is added to by the present position as described by the SNB monthly bulletin.

According to an initial estimate, GDP in Switzerland grew
by 0.7% in the fourth quarter. Overall, GDP thus stagnated
in the second half of 2018, having grown strongly to
mid-year.
Leading indicators and surveys for Switzerland point to
moderately positive momentum at the beginning of 2019.

The general forecasting view seems to be for around 1.1% GDP growth this year. So having not raised interest-rates in a labour market boom it seems unlikely unless they have a moment like the Swedish Riksbank had last December that we will see one this year,

Exchange Rate

There is little sign of relief here either. There was a brief moment round about a year ago that the Swiss Franc looked like it would get back to its past 1.20 floor versus the Euro. But since then it has strengthened and is now at 1.126 versus the Euro. Frankly if you are looking for a perceived safe-haven then does a charge of 0.75% a year deter you? That seems a weak threshold and reminds me of my article on interest-rates and exchange rates from the 3rd of May last year.

However some of the moves can make things worse as for example knee-jerk interest-rate rises. Imagine you had a variable-rate mortgage in Buenos Aires! You crunch your domestic economy when the target is the overseas one.

Well events have proven me right about Argentina but whilst the scale here is much lower we have a familiar drum beat. The domestic economy has been affected but the exchange-rate policy has had over four years and is ongoing.

The Euro

Let me hand you over to the President of the ECB Mario Draghi at the last formal press conference.

First, we decided to keep the key ECB interest rates unchanged. We now expect them to remain at their present levels at least through the end of 2019……….These are decisions that have been taken following a significant downward revision of the forecasts by our staff.

For reasons only known to themselves part of the financial media persisted in suggesting that an ECB interest-rate rise was in the offing and it would be due round about now. The reality is that any prospect has been pushed further away if we note the present malaise and read this from the same presser.

negative rates have been quite successful in our monetary policy.

Although we can never rule out an attempt to continue to impose negative rates on us but exclude the precious in some form.

Sweden

Last December the Riksbank did start to move away from negative interest-rates. The problem is that they now find themselves wearing something of a central banking dunces cap. Having failed to raise rates in a boom they decided to do so in advance of events like this.

Total orders in industry decreased by 2.0 percent in February 2019 compared with January, in seasonally adjusted figures………..Among the industrial subsectors, the largest decrease was in the industry for motor vehicles, down 12.7 percent compared with January. ( Sweden Statistics yesterday)

Like elsewhere the diesel debacle is taking its toll.

The new registrations of passenger cars during 2019 decreased by 15.2 percent compared with last year. There were 27 710 diesel cars in total registered this year, a decrease of 26 percent compared with last year.

Anyway this is the official view.

As in December, the forecast for the repo rate indicates that the next increase will be during the second half of 2019, provided that the economic outlook and inflation prospects are as expected.

Japan

This is the country that has dipped its toe into the icy cold world of negative rates by the least but the -0.1% has been going for a while now.

introduced “QQE with a Negative Interest Rate” in January 2016 ( Bank of Japan)

If the speech from Bank of Japan Board Member Harida on March 6th is any guide it is going to remain with us.

I mentioned earlier that the economy currently may be weak, and the same can be said about prices.

Also he gives an alternative view on the situation.

Following the introduction of QQE, the nominal GDP growth rate, which had been negative since the global financial crisis, has turned positive………Barring the implementation of both QE and QQE, Japan’s nominal GDP growth would have remained in negative territory this whole time since 1998.

Is it all about the nominal debt of the Japanese state then? Also he seems unlikely to want an interest-rate increase.

Rather, premature policy tightening in the past caused economic deterioration, a decline in both prices and production, and lowered interest rates in the long run.

Comment

We find that there are two routes to negative interest-rates. The first is to weaken the exchange-rate such as we have seen in Switzerland and the second is to boost the economy like in the Euro area. So external in the former and internal in the latter. It can be combined as if you wish to boost your economy a lower exchange-rate is usually welcome and this pretty much defines Abenomics in Japan.

As we stand neither route seems to have worked much. Maybe a negative interest-rate helped the Euro area and Japan for a while but the current slow down suggests not for that long. So we face something of an economic oxymoron which is that it is the very fact that negative interest-rates have not worked which explains their longevity and while they seem set to be with us for a while yet.