The consequences of prolonged low interest rates in Europe
Monetary policymakers are becoming preoccupied with the risks of persistently low interest rates to Europe’s still fragile economic recovery. Ultra-easy credit is creating growing economic distortions and asset bubbles, while reviving volatility and risk in financial markets. The European Central Bank realizes it must “normalize” rates, but it worries that sudden tightening could precipitate a financial crisis that could be as bad or worse than 2008-2009.
Global Outlook 2018: Dangerous waters ahead for the world economy
All around, the wind seems to have filled the sails of the world economy. From consumer spending to investment to stock market indices, the sailing seems smooth. But some dangerous currents, including debt-fueled liquidity and low productivity, are converging below the surface. Without an effort by the captains of the world economy to right the ship, it could be pulled under.
The danger of Trump’s tax plans
U.S. President Donald Trump’s proposed tax breaks for the middle class are either negligible or unsustainable, and probably both. Americans should expect a continuing public deficit and a rise in public debt. This will not be an immediate problem for the economy, but it will create growing structural imbalances. Putting the budget in order should be President Trump’s priority. The question is whether he has the vision and leadership qualities to do it.
GIS Dossier: Venezuela lives on the edge
The world's richest country in oil reserves is on the verge of becoming a failed state. After more than a half-century of social harmony funded by oil revenue, a socialist variant of caudillismo has run the country into the ground. Yet political changes are blocked by a determined military junta, awash in drug money and cemented by the threat of U.S. indictments. How long can Venezuela stay on the brink?
The Chinese economy: it’s about debt
China’s high ratio of debt to gross domestic product (GDP) will necessarily lead to an economic slowdown. The question is whether that can happen in a controlled manner that limits the negative effects on the country and the region, or whether it will bring China’s economy crashing down.
Argentina’s Macri in the crosshairs
Argentina’s Mauricio Macri spent his first 16 months as president playing whack-a-mole with a host of problems – including a faltering economy, an incompetent and often corrupt bureaucracy, and rising public anger at utility price hikes. Now, with parliamentary elections looming, he needs to come up with a strategy to avoid becoming a lame duck for the rest of his term.
Mozambique looks for a way out of crises
Mozambique, once held up as a model country for the way it ushered in peace and reconciliation after a long civil war, now faces a new round of potential crises – from a huge corruption scandal, to fiscal instability, to a possible return of civil war. However, with new international investors in its natural resources and an incoming U.S. administration, momentum will likely be found to resolve these issues.
Debt, violence risk instability for Mozambique
The revelation of billions of dollars in secret debt and a resurgence of violence have plunged Mozambique into a two-pronged crisis that puts President Filipe Nyusi between a rock and a hard place. With the country’s renewed instability threatening a slide into civil war, Mr. Nyusi is under pressure to work out a lasting peace with his party’s political rivals. It may be the only way to lure international donors and investors back.
Loose monetary policy could be on its way out
In March, the United States Federal Reserve kept its main interest rate on hold, while the European Central Bank cut its main interest rate to zero. The moves confirmed what investors already knew: the American and European economies still have plenty of weaknesses. But despite appearances, the Fed and the ECB are on track to end their expansionary monetary policie...
Productivity is no free lunch
Europe is worried about low and declining productivity growth. Most politicians and experts have a simple solution: more high-tech investments and more education, especially for young people. But it is questionable whether this proposed fix is realistic or will bring about the desired outcome. The educational visions that...