Yields May Go Negative and Spur Much More Active Fiscal Response, Pimco's Fels Says

The video discusses the potential for negative yields in the US, which could occur due to a severe economic downturn or recession. Central banks, while influential, are not the main cause of this trend but are responding to global secular trends like the global saving glut. This glut results in excess savings and low demand, driving down interest rates. The video suggests that once monetary policy is exhausted, a more active fiscal policy will be necessary to counteract these trends and potentially move away from negative yields.

What might be the consequences if central banks keep their rates higher than the equilibrium rate?

What role does fiscal policy play in countering the global saving glut?