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There are three things that I think most pundits are missing in their prognosis for the economy and they are all basic laws of economics.
Let’s start with the law of diminishing returns, as this applies to saturated expenditures of big-ticket durable goods. This is also related to the law of diminishing marginal utility, which posits that, all else being equal, as consumption increases, the marginal utility derived from each additional unit declines. We appear to have hit that point in at least eight per cent of consumer expenditures, which is double the share of the services expected to stage a huge comeback once the pandemic is fully in the rear-view mirror. Consumer expenditure on big-ticket durables in the United States is now at a record US$16,000 per household, about 60 per cent above the average of the past three decades.
Investing in our climate, social and economic resilience: What are the main policy priorities?
Speech by Christine Lagarde, President of the ECB, at the opening plenary session of the European Parliamentary Week 2021 in virtual format
Frankfurt am Main, 22 February 2021
I would like to thank you warmly for inviting me to speak to you today. It is a privilege to have an opportunity to talk to the citizens’ representatives at the heart of European democracy.
Events like this one allow us to consider national debates in discussions about our common challenges as Europeans.
For all of us, the past year of the pandemic has been an extraordinary challenge. And, at all levels, the public policy response has been truly impressive. National responses have spearheaded the policy effort, with fiscal measures amounting to, on average, 4.5% of euro area GDP.