Global Outlook 2017: Scenarios for the economy
The world economy in 2017 will be defined by four variables: growth, oil prices, inflation and interest rates. Political events could also play an important role, especially a possible rapprochement between the United States and Russia and general elections in France. The potentially fateful impact of the latter on the European Union would be amplified by an Italian crisis.
QE has failed. What comes next?
Eurozone economies have been subjected to expansionary monetary policy for almost five years, and the easy-money approach has failed to jump-start demand and ignite growth. As central bankers begin to face this reality, they may have to choose between shoring up government indebtedness and letting banks go bust, or giving bankers a chance to operate and letting governments default. Which will they choose?
Clueless central banks
Despite quantitative easing, forward-guidance and negative interest rates, global GDP growth has not taken off. Avoiding the business cycle should not be the priority of central banks or governments. Creating conditions that allow businesses and individuals to deal with the cycle, should.
Cheap money policy does not fool citizens
Central bankers and a sizeable group among western economists and political leaders believe that low to negative interest rates are encouraging consumption and economic growth. The policy has not been working, however, because citizens rightly distrust it and appreciate the importance of savings.
Schauble-Draghi clash more about politics than monetary policy
In an unusual turn of events, German Finance Minister Wolfgang Schauble leveled sharp criticism at European Central Bank President Mario Draghi. At first blush the dustup seems solely to concern monetary policy. However, a closer look shows that there are bigger domestic and international political forces at play. Germany may be positioning itself as the main proponent for greater centralization within the European Union.
With India ready for takeoff, Modi pauses over launch button
After his first 18 months in office, during which India’s economic prospects have brightened considerably, 2016 gives Prime Minister Narendra Modi a last window of opportunity for radical new policy initiatives. If he decides on a bold course, it would depart from the incremental approach that has characterized Mr. Modi’s term thus far. ...
Global trends: Europe’s weak spots ready to become new crises
Europe’s leaders have failed to solve the structural problems revealed by the crisis of 2008. Nor have they grappled with issues that have emerged in recent years. Examples include high public debt, the stock market bubble and distorted risk perceptions caused by the eurozone’s artificially low interest rates. For now, the situation has stabilized. Financial market...
Brazil braces for a rough ride, but its strengths remain
The drama of Brazil’s immense political and economic crisis has reached a sort of “ground zero” point, from which it can develop in any direction, leading to a positive or very negative outcome for the country. In early December 2015, Brazil’s Congress unexpectedly and abruptly moved to impeach President Dilma Rousseff. A...
Dysfunctional politics stands in the way of Peru’s economy
More than 10 years of spectacular economic growth have come to an end in Peru with the conclusion of an era of extraordinarily high commodity prices. This sharp downturn coincides with general elections for the presidency and the legislature. Investors and Peruvians in general are assessing what has been achieved, weighing the challenges that the country is facing ...
After Fed delay, investors consider Chinese elephant in the room
Financial markets did not react well to the Federal Reserve’s decision in September to keep interest rates stable. Presumably, investors were worried that China’s slowdown is more serious than anticipated, and that the Fed has well-founded concerns about the outlook for the American and European economies. <i>While...