August 22 marked the longest period of rising share prices in US history. But the stock market's nine-year bull run won't last much longer, as three factors drive up long-term interest rates, reducing the present value of future corporate profits and providing investors with an alternative to equities.
Despite the US government’s recent upward revision to personal saving data, the overall national saving rate, which drives the current account, remains woefully deficient. And the major surplus countries – Germany, China, and Japan – have been only too happy to go along for the ride.
For many emerging economies, it is imperative to pursue a rebalancing of growth patterns, with a more active approach to managing debt and capital flows and their effects on asset prices, exchange rates, and growth. Otherwise, the dangers of unsustainable growth patterns will bring expansion to an abrupt halt.
Rather than sticking with the approach taken by numerous other countries – including Argentina earlier this year – by raising interest rates and seeking some form of IMF support, Turkey has shunned both in a very public manner. Unless it changes course, the government risks much wider damage – and not just in Turkey.
US President Donald Trump’s erratic unilateralism represents nothing less than abdication of global economic and political leadership. Trump’s withdrawal from the Paris climate agreement, his rejection of the Iran nuclear deal, his tariff war, and his frequent attacks on allies and embrace of adversaries have rapidly turned the United States into an unreliable partner in upholding the international order.
Why does US President Donald Trump keep making empty threats against other countries? While his detractors think he is simply a braggart, a fool, and an ignoramus, there could be a less unflattering, though equally depressing, explanation.
The rates of US economic growth and especially personal saving have been higher than previously believed, according to revised data from the Bureau of Economic Analysis. But it's not all good news, because the largest economic imbalances remain unchanged.
When it comes to economic performance, US presidents have considerably more influence over long-term trends than over short-term fluctuations. And it is by this standard that Donald Trump's administration should be judged.
The “best” outcome of President Donald Trump’s narrow focus on the US trade deficit with China would be improvement in the bilateral balance, matched by an increase of an equal amount in the deficit with some other country (or countries). In fact, significantly reducing the bilateral trade deficit will prove difficult.
Are independent central banks willing to force society to sacrifice growth in order to preserve financial stability? That is the fundamental question that must be answered after a decade of quantitative easing.
The consequences of the Brexit self-delusion are now becoming obvious, as Britain’s government finds itself unable to get a parliamentary majority for any realistic plan to leave the EU. If this situation persists, Britain will have only one alternative: another referendum to reconsider the impossible result of the 2016 vote.
In a sharp departure from this time last year, the global economy is now being buffeted by growing concerns over US President Donald Trump's trade war, fragile emerging markets, a slowdown in Europe, and other risks. It is safe to say that the period of low volatility and synchronized global growth is behind us.
Donald Trump’s trade war is an international tragedy. But it could have a happy ending if it eventually reminds us of the risks that free trade imposes on people, and if we improve our insurance mechanisms to help them.
For those who observe that the economic and financial fallout from US President Donald Trump’s trade war has been surprisingly small, the best response is that a lagged effect is exactly what we should expect. Just wait.
In the 1980s, US President Ronald Reagan initiated a military spending race with the Soviet Union that ended up altering the global balance of power in ways that affected many countries worldwide. Could Donald Trump's tariff race with China lead to a similar outcome?
The prosperity of the US has always depended on its ability to harness economic growth to technology-driven innovation. But right now Big Tech is as much a part of the problem as it is a part of the solution.
Countries that rely on pay-as-you-go public pension systems are running up against two problems: increasing life expectancy and rising old-age-dependency ratios. How can such systems be sustained without massive tax increases?
In just the past few days, the US Supreme Court has handed down a series of rulings favoring corporations over workers, and right-wing extremists over the majority of Americans. With the Court following Donald Trump down the path of racism, misogyny, nativism, and deepening inequality, it would appear that yet another pillar of American democracy has crumbled.
Egypt’s qualification for the World Cup showed that the country is capable of competing at the highest international level. Rather than treating its loss as a failure, Egyptians should view it as a learning experience, one that can guide the country as it seeks to achieve its full potential.
The Trump administration seems to believe that America has reached a propitious moment in the economic cycle to play power politics. But can this approach offset the increasingly tenuous fundamentals of a saving-short US economy that continues to account for a disproportionate share of global military spending?
The opposite of populist nationalism is not globalist elitism; it is economic realism. And in the end, countries such as Britain, the United States, and now Italy will learn the hard way that reality always eventually wins.
Contrary to the warnings of some political analysts, even after the recent debacle in Canada, the G7 can and will play a role – albeit a less important one – on the global stage. But that does not mean that the summit's failure was cost-free.
Across the eurozone, political leaders are entering a state of paralysis: citizens want to remain in the EU, but they also want an end to austerity and the return of prosperity. So long as Germany tells them they can’t have both, there can be only one outcome: more pain, more suffering, more unemployment, and even slower growth.
It is not hard to imagine that if Italy's new government proceeds with its ambitious fiscal plans, instituting both a flat tax and a universal basic income, it could blow up the budget deficit. In that case, Italy could quickly find itself out of the eurozone and ring-fenced by capital controls, whether the government intended this or not.
Unlike many other European countries, Italy still has not restored economic growth to its pre-crisis level – a fundamental failing that lies at the heart of many of its political problems. Now that a new anti-establishment government is taking power, it remains to be seen if the economy will be remade, or broken further.
Economists who assure us that advanced-economy debt is completely “safe” sound eerily like those who touted the “Great Moderation” – the supposedly permanent reduction in cyclical volatility – a generation ago. In many cases, they are the same people.
Financial markets have finally woken up to the fact that Italy could soon be ruled by a populist government with designs to take the country out of the eurozone. And, given Italy's tepid economic performance since adopting the single currency a generation ago, there is little reason to think that the current crisis is a one-off event.
Severe political uncertainty, chronic slow growth, and a sovereign-debt level currently hovering around 160% of GDP already is enough for Italy to trigger a debt crisis. And there is no plausible resolution that would not generate additional risks and complications.
The federal government’s debt has risen from less than 40% of GDP a decade ago to 78% now, and the Congressional Budget Office predicts that the ratio will rise to 96% in 2028. While many blame the tax cuts enacted last year, the real reason lies elsewhere.
The May 19 deal between the US and China seems to have reduced tensions between the two countries. But, given the global nature of America's trade deficit, any effort to impose a solution focusing on one country will likely backfire.
Practically no one, outside of computer science departments, can explain how cryptocurrencies work, and that mystery creates an aura of exclusivity, gives the new money glamour, and fills devotees with revolutionary zeal. None of this is new, and, as with past monetary innovations, a seemingly compelling story may not be enough.
The sanctions against Iran reinstated by US President Donald Trump raise two all-important questions that have no convincing answers. But they also raise a third question, about which financial markets are likely to be wrong.
Some may view the US dollar’s appreciation as consistent with a longer-term rebalancing of the global economy. But, as Argentina’s recent request for IMF financing starkly demonstrates, a sharp and sudden dollar appreciation risks unbalancing things elsewhere.
There are now nearly 1,600 cryptocurrencies, and the number continues to rise. It is time to start recognizing their issuers' utopian rhetoric for what it is: self-serving nonsense meant to separate credulous investors from their hard-earned savings.
How has a country of under five million people become a world leader in developing holistic policies that promote democratic, sustainable, and inclusive economic growth? The answer lies in its people's belief that focusing on the welfare of all citizens not only enhances wellbeing, but also increases productivity.
For now, Fed appointees have been treated almost as well as generals in the US president's universe. In a crunch, however, the Fed’s much-vaunted independence could prove more fragile than most people realize.
With economic conditions returning more or less to normal around the world after a decade of financial crises, nationalist populism is now seen as the biggest threat to global recovery. But is it possible that this consensus has emerged just as the populist wave has crested?
The US Trade Representative appears to have made an ironclad case against China in the so-called Section 301 report issued on March 22. But the report – now widely viewed as evidence justifying the Trump administration's recent tariffs and other punitive measures against China – is wide of the mark in several key areas.
History is less likely than game theory to provide useful insights into where the latest trade dispute between the US and China may be heading. The question, ultimately, is whether new tariffs will eventually lead to a more cooperative game, or to a competitive one in which everyone loses.
US President Donald Trump's recently announced import tariffs on steel, aluminum, and $60 billion in other goods that the US imports from China each year are in keeping with his record of responding to nonexistent problems. Unfortunately, while Trump captures the world's attention, serious real problems go unaddressed.
As artificial intelligence reshapes the global economy, economists who once argued that China's massive population would propel it to superpower status should rethink that assumption. In fact, as the global economy reaches higher stages of development, China's labor advantage today could become a handicap tomorrow.
The US will be paying for its current fiscal excesses with the promise of future payments. But inefficient economic stimulus now will not give future generations the productive resources needed to make good on it.
With the entire global economy becoming inextricably linked to the Internet and digital technologies, stronger regulation is more important than ever. But if that regulation is fragmented, clumsy, heavy-handed, or inconsistent, the consequences for economic integration – and, in turn, prosperity – could be severe.
Economists may warn that the combination of Trump’s protectionism, big tax cuts, and uncontrolled government borrowing, coming at a time when the US economy is already near full employment, will ultimately fuel inflationary pressure. But financial markets simply do not believe this message.
From the anchoring role in society of the middle class to the agility and resilience of mid-size firms, the middle has long been regarded as consistent with both individual and collective wellbeing. Yet, in recent years, the middle has become less stable, less predictable, and more elusive.
The removal of presidential term limits in China sent shock waves around the world. But the real issues that should be confronted – not just in China, but also in the US – concern the quality of a country's leadership.
The crises that erupted in countries like Ireland and Greece a decade ago would not have been so severe had their debt been linked to their economic performance. And the same is true today: Investors around the world will continue to accept the risk, given the unlimited upside to investing in entire economies.
The Trump administration's proposed tariffs on steel and aluminum imports will target China, but not the way most observers believe. For the US, the most important bilateral trade issue has nothing to do with the Chinese authorities' failure to reduce excess steel capacity, as promised, and stop subsidizing exports.
Economic commentators are better at rationalizing past exchange-rate movements than at forecasting future trends. So, when it comes to explanations for the dollar’s decline over the past year, we are confronted by an embarrassment of riches.
