Contributions

  • Massachusetts Institute of Technology. Dept. of Economics - Contributor

Publication

2006 - Massachusetts Institute of Technology, Dept. of Economics, Cambridge, MA, Massachusetts

Language

English

Word Count

4,000 words, Guess

Page Count

16 pages

Identifiers

Description

The world has a shortage of financial assets. Asset supply is having a hard time keeping up with the global demand for store of value and collateral by households, corporations, governments, insurance companies, and financial intermediaries more broadly. The equilibrium response of asset prices and valuations to these shortages has played a central role in global economic developments over the last twenty years. The so-called "global imbalances," the recurrent emergence of speculative bubbles (which recently have transited from emerging markets, to the dotcoms, to real estate, to gold...), the historically low real interest rates and associated "interest-rate conundrum," and even the widespread low inflation environment and deflationary episodes in parts of the world, all fall into place once one adopts this asset shortage perspective. Keywords: Asset shortages, high valuations, speculative bubbles, low interest rates, low inflation, monetary policy, lender of last resort. JEL Classifications: E3, E4, E5 F3, F41.

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