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The 2020 US private saving boom: An unexpected result of COVID-19 (PIIE, 7 min read) Federal cash transfer during the crisis is projected to push the US net private saving rate to its highest since WWII. But that could mean that as restrictions on business and personal activities are relaxed in the coming months, aggregate demand will accelerate economic recovery and cause a temporary uptick in inflation.
Why Siegel Is Wrong About End Of Bond Bull Market (Advisor Perspective, 10 min read) Jeremy Siegel of Wharton, who sees rates rising in the US, is mistaken. The US is suffering from ‘Japan Syndrome’ (liquidity trap), where the current level of interest rate is “fairly valued” and represents the fundamentals of the economy (sluggish growth, low inflation, and low demand for capital).
Negative monetary policy rates and systemic banks’ risk-taking: evidence from the euro area securities register (ECB, 21-page read) Negative monetary policy rates in the euro area induce systemic banks to reach-for-yield as they do not pass negative rates to retail customers; they, in turn, invest more in risky securities and take higher risk in loans. The effects are stronger for less capitalised banks.