Report
The consensus view in the United States: It is better to have financial crises than to prevent wealth creation in expansion periods
Asset price bubbles have been a regular feature of expansion periods in the United States since the 1990s. There are currently risks of another bubble in equities (especially in the new-technology sector), and in residential and especially commercial real estate prices. But the consensus view in the United States is that in periods of expansion one should not combat bubbles (via monetary and fiscal policy) and that Americans should be allowed to create wealth. Later, of course, bubbles burst and there is a financial crisis, but the view is that these crises are brief due to the expansionary monetary policy which is then implemented, thanks to labour market flexibility. The risk with this strategy is that financial crises may be increasingly drastic in the United States, because the expansionary bias of monetary policy leads to increasingly sharp rises in asset prices, and the financial crises may leave lasting traces (lower productivity gains, fall in the participation rate) in the real economy.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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