Mark Carney, the Governor of the Bank of England is saying this morning that we are “moving closer” to a higher central bank rate. Janet Yellen of the US Fed has been saying the same. They’ve both been saying it for a couple . . . of years now — so desperate they are — and their respective governments — to see something approaching old-fashioned economic growth being resumed.
Undoubtedly, meaningful central bank interest rates in the advanced countries will be resumed sometime in the future. But when? A long time yet. Why? In the last 20 years Japan, America, the UK — and then Japan again — and most recently the EU — have been printing so much money — trapped at present in crazily-priced modern works of art, luxury yachts, high share prices and reserves deposits of banks — that it’ll be a long time yet before it trickles down into the public and causing inflation.
And then, when bearing in mind that China is finding export markets more difficult to find, and that typical urban and suburban inhabitants of advanced countries are already contented with a full kit of status goods, then the vast numbers of economists at the Bank of England and the Fed might start to realise that we may be entering a new economic era. Consumers in the advanced countries are changing most of their discretionary expenditures towards services such as education and health, and experiences such as holidays and passive entertainment — much less tradeable internationally — rather than physical products. It’s a distinctly different world they are going into.