Dark clouds gathering over the global economy
We are probably coming to the end of a global economic recovery. But with interest rates still hovering around zero, central banks will have no ammunition to fight a recession. Meanwhile, debt is high and more trade barriers are going up. The underlying causes of global economic imbalances, and not just the symptoms, must be addressed.
GIS Dossier: Trumponomics
Eighteen months into his presidency, Donald Trump has already implemented several major economic initiatives, including big tax cuts and rewriting American trade policy. Neither the disaster foreseen by his critics nor the miracle envisioned by his supporters has materialized. Instead, there has been a mix of positives and negatives for the U.S. economy, just as GIS experts had predicted since the election. This GIS Dossier reviews the unexpected consequences of “Trumponomics” and the impact it is likely to have in the future.
Trump’s trade war is poised for a Pyrrhic victory
The flip side of the Trump administration’s drive to reduce the U.S. foreign trade deficit is that it will leave the rest of the world with fewer dollars to finance its budget deficit. President Trump could cut spending drastically or persuade the Federal Reserve to buy more bonds, but neither seems likely. More probably, he will do nothing as domestic rates rise and the dollar strengthens – widening the trade deficit again.
Opinion: A lost opportunity for cryptocurrencies
Cryptocurrencies like Bitcoin are volatile, but could prove useful by injecting a needed element of competition into the realm of monetary policy and finance. Rather than allow this, however, governments will probably step in to regulate them, perhaps under global supervision. If that happens, we will have missed an opportunity to foster new business and job creation in a healthier monetary environment.
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.
Opinion: Mario Centeno’s useful ambiguities
New Eurogroup Chairman Mario Centeno is known as a socialist, but despite his “anti-austerity” reputation, he slashed government spending and deficits while he was finance minister of Portugal. This earned him trust on both sides of the fiscal policy divide, and will allow him either to keep the Eurogroup as a low-profile talking shop, or to help it raise its stature to eurozone policymaking body.
Janet Yellen considers her last act
Janet Yellen has done what was needed to leave behind fond memories of her term as Fed chief. She waited until the U.S. economy showed vigorous signs of recovery before announcing a soft-landing solution from the excessive liquidity inherited from Ben Bernanke. In part, this was a conscious choice to do what markets expected. But it may have been governed more by a long-term pessimism about the outlook for the economy.