If you have been “watching” you will have noticed a fairly sharp deceleration in global economic activity since the middle of 2014. World trade volume growth in particular has been heading into recession type territory:
From one critical perspective this report appears to blame consumers of advice for the outcomes of a business model compromised by transaction remuneration. Little is said of the inadequacies of suitability standards and their regulation or of the failings of investment processes focussed on the transaction. Lacking such balance the report appears to advocate for the transaction model and thus is pared of its credibility!
If you had stopped reading the Brondesbury report into Mutual Fund Fees at the first summary conclusion on page 6, you might have walked away thinking the report was in favour of fees for the right reasons:
“Evidence on the impact of compensation is conclusive enough to justify the development of new compensation policies.”
If you had read on you should be left in some doubt as to how much of a marginal benefit a move to fees would have on investor outcomes. The report appears to build an argument that suggests investor behavioural biases are the most important vitiating impact on outcomes and that advisors are merely responding to their transaction requests.
I am going to delve into the Brondesbury report shortly, but first we need to step back and look at the frame we are in, because neither the Brondesbury report nor the CSA have fully explained this.
The CSA have unfortunately addressed mutual fund fee issues separately from the wider problems in the Canadian financial services industry and, most notably, separate from that of best interest standards. There may well be a reason for this!
Aside from the investment counselling/discretionary client portfolio management segment of the industry, whose standards and responsibilities appear, to all intents and purposes, to be ignored as valid reference points in current deliberation, the frame we are looking at is the one that holds the advisory segment.
The advisory segment is still regulated on a transaction by transaction basis with responsibility for the transaction effectively lodged with the individual investor. This is a simple parameter to parameter model that aligns risk preferences and investment objectives, adjusted for some nebulous assessment of investment experience (often arbitrarily assigned), to a product recommendation. The product recommendation passes through the parameters. In the Securities Act, for instance, the provision of a transaction recommendation within an advisory registration capacity is not technically considered to be advice.
The KYC is not a portfolio/optimisation process. In fact, if you were to hand a KYC to an investment professional they would have to bypass it to a more sophisticated investment process to construct, plan and manage an asset allocation and security selection that matched a given investor’s risk preferences/asset liability profile.
The current culture assumes that investors come with requests on a transaction by transaction basis, that the KYC process is effective and sufficient and because of its simplicity is therefore simply understood. An investor in this frame should be able to own the transaction with the advisor only responsible for the product advice and not the management, or the construction or the planning. If we refer to the careful delineation in the Securities Act, the investor is not actually being advised.
In this frame “the culture” assumes that it is the investor’s own behavioural biases that drive mis-selling and that the advisor must accommodate these biases or risk losing business: I phrase this with reference to comments that I will, in a later post, draw from the Brondesbury report.
I have a number of issues with this framing of the KYC process and so, it would seem, did the OSC way back in the late 1990s and the early 2000s –note the FAIR DEALING MODEL and earlier Financial Planning Project initiatives:
In 1999, the Canadian Securities Administrators committee on financial planning proficiency standards identified conflicts of interest in financial planning advice as a more significant concern than representatives’ proficiency. The CSA committee undertook to pursue this area as the second phase of the Financial Planning Project. Around the same time, OSC Chair David Brown determined that changes in the social and economic environment, and in the business structures and objectives of the securities industry, warranted a fundamental re-examination of the regulations governing the delivery of financial advice to retail investors. He recognized that our regulations are still product-based, as they have been for decades, even though the industry has moved to an advice based business model. In early 2000, the OSC launched the committee that has led to this Concept Paper.
The promise of service has long since exceeded that of the simple transaction. It has long since extended to the provision of advice that relates to overall financial needs and financial assets. The process needed to manage these needs and assets is more sophisticated/complex than that provided by the KYC parameter model.
Today the KYC remains as the barometer of the suitability of product advice and the assessment of the suitability of advice. In order to deliver the promises that the industry is effectively making the investor today you would need to move your focus of attention to a more complex and integrated service process. In truth investors should be paying for the process and not the transaction. Unfortunately the industry remains mired in a culture that rewards the transaction and not the process, and hence focus has remained on the transaction and transaction remuneration.
If we are to deliver on the service promises being made we need to develop our processes and thereby raise our standards of advice. By removing remuneration from the transaction and aligning it to the process, i.e. a fee for service process and advice, we change the industry from one focussed on transactions delivered by a rudimentary process to one focussed on advice delivered by modern technology and knowledge that better matches the promise. At the moment advisors can effectively promise best interests yet remain regulated on the transaction. This risks a disconnect between the processes needed to deliver the wider promise and those needed to satisfy minimum standards.
The Brondesbury report, along with many others, is stuck in the transaction mindset:
It believes in a world where investors initiate and are able take control of their investment decisions, where the KYC is simple and effective in delivering investment solutions, where advisors are not promising a higher standard of advice and are hostage to investor behavioural biases and where advisors are not responsible for educating the investor over their process and disciplines. It believes in a world where the cost to the investor of delivering the transaction solution is of equivalent value to the investor and where there is no other promise than the transaction and no other alternative spectrum of advice. The report ignores the fact that today’s promises exceed the boundaries of KYC suitability and require more advanced processes that naturally differ from those required to deliver stand alone product recommendations.
The Brondesbury report is looking at the problem through the rear view mirror, replete with longstanding cultural biases that have impeded the development not only of higher professional standards but more efficient and cost effective wealth management solutions. This is a very complex area. I will address some of the wider issues as I explore the Brondesbury report in subsequent posts.
I discuss issues with the current parameter to parameter suitability model in my submission to the CSA on Best Interest Standards in Appendix A. Also in this document are a number of excerpts from many of my blogs on best interests and the KYC process.
Also worth reading is “Fiduciary Obligations of Broker-Dealers and Investment Advisers” by Arthur B Laby.
“we suspect that much of what we see as impact of compensation is just investors failing to make rational decisions.” P53 of the Brondesbury Report on Mutual Fund Fees.
I am in the midst of reviewing the CSA commissioned Brondesbury Report on Mutual Fund Fees and am ploughing through the reference material which supposedly underpins its conclusions. Amongst the many nuggets I have unearthed is the following taken from “Investors’ Optimism: A Hidden Source of High Markups in the Mutual Fund Industry” :
Previous works have identified investors’ optimism bias towards equities issued in their domestic market. In particular, academic research on mutual funds has focused on investor’s lack of financial literacy. …These empirical findings of investor’s deviation from rationality are in line with our model’s emphasis on investor’s limited financial knowledge of the mutual fund industry.
Investors’ optimism bias can be closely related to their lack of knowledge of the fund market, leading them to choose sub-optimal benchmarks such as bank savings instead of low-cost index funds or ETFs. Besides, investors’ optimism bias is probably influenced and reinforced by the marketing practices of mutual funds, which promote the sale of fund shares.
The reference to sub-optimal benchmarks is both noteworthy and ironic because both the new Point of Sale disclosure documentation for mutual funds and the performance reporting requirements laid down in the CRM2 lack mandated performance benchmarks.
Interestingly the Canadian Securities Administrators had earlier proposed a GIC or cash based benchmark for Point of Sale mutual fund disclosure documentation, but baulked at the last minute for a number of reasons.
So why were Canadian regulators looking to implement “sub optimal benchmarks”? Were they ring fencing consumer behavioural biases in the interests of transaction remuneration or were they themselves acting in ignorance? We may never know but the point is an interesting one and much more so given the deeper contextual focus in the Brondesbury report on investor behavioural biases (chapter 5):
“Behavioral biases of investors are not easy to overcome. Behavioral biases affect advisor behaviour (just as advisors affect investor behaviour), investor choices of investment, and ultimately, investor outcomes”
“Time is a precious commodity to most advisors. There is only so much time an advisor can afford to spend to overcome the behavioral biases of investors, regardless of how they are compensated”
Behavioral biases of investors are not easy to overcome and they are a key factor in sub-optimal returns on investment. This poses a real limitation of the conclusions we can draw from the research literature, when we look solely at clients of commission-based advisors.
If there is no comparison between different forms of compensation, one can easily be misled into believing that sub-optimal behaviour is the result of the advisor’s recommendations and not, at least in part, the behavior and attitudes of the investor.
There are two issues related to behavioral biases that must be mentioned here. The first is the question of who is responsible for overcoming the behavioral biases of individual investors. While helping clients to do so may be something that a top-notch advisor will choose to do, we are not aware of any rule or principle that points to de-biasing as an advisor or a firm responsibility, regardless of compensation scheme unless a failure to do so impacts ‘investment suitability’ in some way.
“we suspect that much of what we see as impact of compensation is just investors failing to make rational decisions.” P53 of the Brondesbury Report on Mutual Fund Fees.
This quick post introduces some of my concerns with the Brondesbury report and my belief that many of its conclusions and analysis remain mired in a transaction mindset that continues to beset regulation of advice in Canada. Regulators and, it would seem, some esteemed others appear mired in a perplexing behavioural bias towards “what does and does not represent investment advice”.
I have blogged on fundamental liquidity issues recently and one point that I want to bring out is that the greater the divergence between asset values and GDP and the greater the divergence between broad MS growth and GDP growth, especially in slower growth frames, the “fatter the tail of the distribution”.
Volatility at one level is a measure of the sensitivity of an asset’s price to new information, shocks to the system/de facto changes in the energy of the system. It reflects changes in demand flows for assets which can reflect changes in risk preferences and risk/return expectations. In a general equilibrium volatility is meant to be a static physical characteristic reflecting the fundamental nature of the asset and its relationships, but we do not currently have general equilibrium relationships and volatility is not a stable measure of anything.
Essentially when we have excess asset focussed money supply growth (EAFMS) amidst a slowing growth frame the “accumulated liquidity in” decisions exceed the “present value of future liquidity out” (PVLO) decisions. In a sense liquidity (at its heart a function of the relationship between asset allocation decisions and C/S/I/P decisions) becomes more sensitive to short term changes in demand flows and risk/return expectations, risk preferences and other factors. As the ratio of EAFMS to PVLO rises so does the natural volatility of the system.
Why the tail? Why not volatility at 1 standard deviation? During periods of excess monetary flows demand changes are not in totality covariance issues (ie. relative attractiveness of one asset to another) but absolute flows that suppress relative price reaction. In other words we see a fall in volatility throughout most of the distribution. All the while the system due to EAFMS/PVLO imbalances becomes more sensitive to changes in flows, preferences, expectations and shocks.
Given that the system because of its imbalances becomes more sensitive to small changes in any one factor, the bigger the divergence noted in paragraph A the greater the probability of an extreme risk event. The greater the accumulated liquidity in to PVLO the larger the tail: the risk event and its probability increase.
In reality, from a given point on, we can effectively discount the rest of the distribution in any analysis as a dynamically widening tail is merely a statistical constraint on the way we should be viewing risk. We are only exposed to the wider risk distribution if forces suppressing risk remain influential.
A recent IMF report pointed out some supposed vast amounts of room available for the world’s economies to step up government borrowing to finance consumption, investment and production decisions. Oddly the report appeared to ignore other forms of debt and material deterioration in key areas of the economic frame.
When the crisis broke back in 2007 it was clear to me that monetary and fiscal policy would likely need to go for broke to support economic growth and employment at a time of collapsing asset values, debt defaults and a world wide retrenchment in expenditure of all kinds. As it happened a great deal of that support went into asset prices and financial institutions.
But some years after the crisis, after a slow and drawn out recovery with interest rates locked to the floor, economies still appear to be borderline reliant on debt financed government expenditure. Any attempt to reduce borrowing, to either raise taxes or cut expenditure to pay back debt would be considered by many to have an adversely negative impact on economic growth, especially at such low growth rates.
In a recent tweet I made the comment “Not a paradox: ratio of MS to assets & of asset prices to GDP, and hence to GDP functions C/I/S/P out of synch”.
Given the sensitivity of markets to even small changes in demand should anyone stand ready to provide liquidity at the onset of the tail of a distribution?
If a liquidity decision eventually exits, then there is a maximum amount of divergence which any given financial system can accommodate before the dynamics of the reverse flow overwhelm any attempt to keep it afloat. We must bear this in mind.
A recent article by Nouriel Roubini “The Liquidity Time Bomb”, to which the tweet responded, commented on the apparent paradox between vast amounts of financial stimulus and monetary expansion alongside a decline in market liquidity for assets.
Why do we need liquidity in the market place? There are a variety of fundamental economic reasons. Entities wishing to purchase assets (from savings out of income or from loans) in either new/existing issues, entities who may be dissaving and wish to sell assets in exchange for cash for either consumption (debt repayment) or to purchase higher yielding assets, businesses that wish to raise capital and other entities like governments that wish to borrow. That is markets function as an important medium for saving, consumption, investment and production decisions…they facilitate the allocation, pricing, accumulation (and the reverse) and transfer of capital ownership rights.
I have seen that the IMF has asked the Fed to defer interest rate increases until we see clear signs of wage increases and inflationary pressure.
The request IMO is both scary and rationale given that so much of today’s National Income Accounting Identity (output=C+I+X-M) relies on factors that lie outside of its operation. I speak of new bank generated loan growth given that income growth/distribution and investment growth still appear to be weak in the scheme of things..i.e. C+I the drivers.
The last time the FRB delayed interest rate increases we had a debt financed consumption boom in the US followed by IR increases and a de facto financial collapse. By raising rates we likely restrict one of the few modes of generating consumption growth in the US (note auto loans) and many other countries. We also likely raise the impact of existing debt burdens on what are to date still historically low rates of income/wage growth.
As such you have to ask yourself just what are we waiting for? Well we need higher income growth, but not just higher income growth: we need a more equitable and fair distribution so that economic growth itself becomes less reliant on debt and low interest rates, and less exposed to the scary divergence of asset values.
But the world is also changing in ways that question whether we can effectively outwait the inevitable: populations are aging and declining. Areas where the frame can still expand in consumption terms, areas such as China, may be heading into their own period of slow growth and low IR debt support.
Importantly will the status quo submit to a reconfiguration of the pie and can the world assume a less debt dependent economic raison d’etre?
So yes, the rationale to defer interest rate rises is both scary and realistic, but it fails to answer important questions: what are we waiting for, how long can we wait, and are our hopes realistic?
This is just a quick 3 minute post, but the issues are critical!
After a strong mid 2014 new orders had fallen heavily with nominal order data especially hard hit. After an initial slide the trend seems to be levelling out, but levelling out is not what the economy needs.
Long term, the order profile is flat if we adjust for prices – note I have adjusted for producer prices not order prices, although over time I expect little difference.
Annual growth rates have taken a punch to the gut, but if we adjust for monthly variance and producer prices we find that the downturn is less marked, although not necessarily insignificant:
What I do find interesting, and which backs up my thoughts re last summer’s surge in activity, is the fact that the rise in activity towards the middle of last year is more or less reflected in the downturn in the early part of this year. This pattern comes about after adjusting for PPI and basing % changes on rolling 6 month average data to arrive at a better fix of actual capacity and order flow:
Motor vehicles and parts seems to be the notable exception, but I do have concerns over debt financing and weak income growth.
Some charts and brief comments I forgot to post:
Growth in world trade volumes has fallen off significantly since summer 2014:
Interestingly US trade data shows a tail off in US auto exports and a rise in Auto imports. Imports rose strongly in March and fell back in April (opposite for exports), although much of this has been ascribed to the impact of West Coast port strike issues.
A recent BIS report on “Developments in credit risk management across sectors:” raised some interesting points regarding the stability of the financial system. What I found interesting was the increasing use of collateral agreements and in particular higher quality/more liquid assets. If the financial system is exposed to a risk event there is a risk that this collateralisation of higher quality assets could increase the correlation of these assets to the risk event and may well end up drawing liquidity from other areas. Likewise as risk in the system increases the need to hedge and hence post collateral may further infect expected price reactions.
Is investment expenditure in the US really looking strong? I picked up some tweets on this the other day which stated that it was indeed.
The above graph shows domestic investment of US private business net of capital depreciation. A couple of points should strike you immediately: one nominal expenditure peaked back in the late 1990s; two, a lot of the retracement (or the pluck as Friedman might have said) is a consequence of the unprecedented decline seen during the dark days of 2009.
We need to look at increasing inequality as an unfair tax on social and economic stability. And so, my brief thoughts on this Tim Cestnick article in the Globe & Mail;
At a very simple level the economy spends what it earns (Output=expenditure=C+I=C+S, where S is income spent but not consumed). In reality the picture is somewhat different in that we have monetary loan expansion that over time has served to increase the demand/expenditure for goods/services and investment expenditure.
Economic growth is the growth of expenditure whether it be consumption or investment goods. If we start to allocate increasing amounts of income towards a very small % of the population what we end up doing is to constrain the ability of the economy to grow.
For one lower income growth limits borrowing ability (something which had sustained GDP growth) and it may retroactively impact the ability to repay previous loans based on lower ex post income growth.
Greater allocation of income to one small segment of society also risks a higher allocation of money towards assets and away from consumption. Increasing income inequality results in lower recycling of income into demand, and as the growth rate of demand slows so does the growth rate of investment.
Importantly future flows determine the valuation of assets, so rising inequality amidst weaker GDP growth poses risks to assets prices. The significance of this circularity has been lost on the very wealthy in a time when monetary policy has been outwardly in favour of asset price support in a weakening growth environment.
If we had less income inequality then tax rates would also likely be lower and we may also have a smaller state and a more outwardly capitalist economy. The need for higher tax rates is partly due to structural imbalances like income inequality: think of two monkeys swinging through the trees, one with all its limbs and the other with only one arm.
Clearly we need incentives for people to take risks with capital, but we also need to make sure that the system has the necessary circularity of flow. The income of the very wealthy is dependent on the expenditure of all and the valuation of their assets too. This is something many have lost sight of: today’s high market valuations relative to historical benchmarks (note the Shiller CAPE) are assumed by some to reflect a different set of dynamics supporting valuation whereas many of the growth engines of the past are collapsing.
At a time when there are so many negative forces impacting the stability of the economy a more efficient, though still incentivised, distribution of income would go a long way to alleviating economic and geo-politic stress. Otherwise we risk increasing social instability and greater threat to income and wealth.
The post World War II years are a very short space in time and certainly not long enough to assume that the having your cake and eat it too mentality is a natural economic dynamic. In reality increasing income inequality is a de facto tax on economic and social stability in that shifting income and wealth from one set of people to another creates dangerous imbalances and inefficiencies. The present need to raise taxes is an ex post not an ex ante action.
Brief thoughts re a recent Barbara Schechter article: Marketplace lenders step out of the shadows in Canada — should we be worried?
I tweeted on this. Some additional comments. Peer to peer lending is different from bank lending in that it does not result in an increase in money supply growth. It may result in an increase in velocity of money supply, something which has been dropping of late in many economies as a result of quantitative easing and a number of other dynamics. It should also increase the efficiency of the intermediation system by offering lower interest rates and quicker access to credit to many borrowers. There are some cons: one of which is that it will increase the liquidity risks in the system in the event of an economic downturn/ financial market crisis. This of course depends on how many may view their loans as money like when they have been transformed and how this market place securitises the loan book. At the present moment in time it may also increase the amount of consumer debt over and above safe levels, although this would not necessarily be an issue in less leveraged environments.
US total private sector employment growth: the rolling cumulative 5 year rate of change using high water mark analysis. The last two growth cycles have been way below your typical post war level.
And you wonder why economic growth is low?
Many say that lower interest rates should raise asset valuations by lowering the rate at which future income streams are discounted. This may be fine for high quality government bonds where coupons are fixed, but is not necessarily the case for equities where we are dependent on future flows (earnings, dividends, economic growth, CAPEX).
What is the major determinant of long term real equity returns? Earnings growth, and long term earnings growth is dependent on real economic growth. If we look at real growth rates they are falling, and have been falling for some time. This is part of the reason why interest rates have been falling; that is to accommodate falls in nominal and ultimately real flows.
The following shows annualised annual growth rates over rolling 15 year time frames (in other words geometric returns) compared to the Shiller Cyclically Adjusted PE ratio:
These charts merely introduce the need for greater perspective when assessing valuations and valuation metrics and are not definitive. I will explore these issues in the next few posts.
People say that current market valuations are not extremely high and that relative to bond yields they are historically attractive:
Everybody is asking and at times hoping to answer the question as to why world economic growth is slowing down, why is it so sub par, why has it not recovered post the turbulence of 2007 to 2009? There are many straws in the wind, but which ones are cause, which ones are consequence and which are accommodation linking both? In a world where diverging tiny margins can accumulate into significant distances it is hard to determine just what and which is the key.
If you stream through the data it is pretty clear that developed economy growth has been slowing for some time and that monetary policy has accommodated this adjustment with lower interest rates and a relaxed attitude towards money supply growth. At about the same time these trends were moving ever closer to their sweet spot on the horizon (because we are not yet at peak of this particular movement) certain developing markets really got going, with the help of a fair amount of their own monetary stimulus but also by a reconfiguration of global supply chains and offshoring in key economies. All factors combined to create a heady and dangerous global financial imbalance, a weak bridge cast across a widening economic divide. No wonder it all came crashing down..but who was to blame? The world’s central bankers who were blindsided into excessively lax monetary policy by a low inflationary world that had become obsessed with laying off and chopping and dicing of risk to those “who could best absorb and bear it”, or some of the finer strings in the mesh? Well, some have chosen to blame excess savings in the emerging/developing part of the world, principally China, but this is all too pat. The “savings glut” theory, if you can really call it “excess savings”, was merely a return of serve of part of the vast ocean of financial and monetary excess that barrelled through the early to mid 2000s.
World trade growth is slowing down. Note: 6 monthly growth rate of exports.
Shorter term data shows a sharper drop for Japan and a general deceleration elsewhere. Has the European export recovery peaked?
And on a fundamental note, it looks as if the higher growth period of the post crisis recovery has now ended:
For me the “Savings Glut” Hypothesis falls down on a number of key areas:
The first and most important is that it appears to ignore significant loan/monetary growth which breaks the point in time National Income Identity on which “Savings Glut” arguments apparently rest. I say apparently because much of the discourse supporting the SG hypothesis is either couched in nuanced semantic surfing and/or bereft of argument that you can trace directly back to the source of the flows from which they derive savings. Many supporters of the SG hypothesis either ignore these monetary dynamics totally or disavow them without cause.
The second is that it ignores the foreign exchange and central bank monetary dynamics involved in much of the FX/asset purchases. Key components of the trade balance/net investment position were orchestrated by Central banks creating new money to buy dollars and thence assets.
The third is that it ignores the fact that the major mega surplus economy, China, was and remains to a very large extent driven by loan financed (new money) gross fixed capital investment. Again the basic National Income Identity model misses a myriad of inter temporal dynamics. The SG argument was that it was excess savings and not monetary and financial system excess that caused the crisis and to fully understand the imbalances you have to look at where National Income/output is derived.
The fourth is that it ignores the very important development of emerging Asia as a global production hub and the off shoring dynamics that saw significant components of US and other international manufacturers move tranches of their manufacturing base to these countries. This issue is well covered and documented.
Finally, as discussed in numerous papers, focussing only on the net investment flows ignores vast sources of excess demand for assets that were also instrumental in pushing financial markets out of synchonisation with their economic fundamentals.
I will look to explore and illustrate these arguments in coming posts.
Oh how I wish new order data was price adjusted!
A round up of tweeted information of Central Bank quarterlies, research and views on secular stagnation, income inequality, monetary policy and interest rates, markets, economies and assets and financial services regulation including the tug of war between best interest standards and “suitability”….and much much more!
Inflationary dynamics have brought about a large relative increase in real incomes over the last six months or so.
Yes it looks as if much of the most recent improvement has not been “spent”, but it is only 1 or 2 months into this gap which must itself be set against strained income increases over the last decade. Longer trends and frames remain important for the sustained growth rates over time and the current frame remains a weak one. Personal consumption expenditures as a % of disposable income remain at historically high levels and consumer credit growth may also be a notably factor weighing against leeway for growth in consumption (see end of post).
This is a quickly penned thought on Andy Haldane’s recent comments on interest rates and deflation:
In a recent speech Andy Haldane of the Bank of England suggested that interest rates may well need to fall as opposed to rise following on from recent falls in inflation. I would agree that the secondary impacts of price declines need to be seen before we can assess whether or not these price falls could indeed trigger stronger deflationary forces.
For one, price declines may lead to lower revenues (note US retail sales) and lower revenues may impact on wage increases.
Secondly, lower revenues impact cash flows and cash flows impact asset prices, especially for high yield debt in sensitive sectors. Global markets remain especially sensitive to asset price movements and factors which may impact asset prices.
Thirdly, we are in a complex deflationary frame where aging populations, slowing population growth and relative weakness in corporate investment (note buybacks) is already a significant drag on the global economy. Falling prices could well trigger latent dynamics in this structure.
And finally, areas of the world which could well create the demand necessary to reinvigorate the frame, for example China where growth appears to be slowing sharply, may also be adding to tensions within the global growth frame.
So yes, interest rates could fall, in the sense of defending asset prices and attempting somehow (I do not quite know how) to reinvigorate or at least support demand, or rather maintain marginal cash flows.
But in reality we do not know because we lack at the moment a measure of the sensitivity of the frame to short term shocks of any financial or economic nature. We know the frame is weak and has been for some time but as to its sensitivity, we know very little.