Kamala and Trump have different proposals regarding tariffs, taxes, energy and immigration. If you believe that the ongoing global warming is due to carbon emissions and desire a transition to renewable energy worldwide, and if you believe that trade between countries is not a “zero-sum game”, you already know who you will be rooting for.
The global economic environment has changed as the U.S.—and to a less confrontational degree, the European Union—have clearly established a context of technological rivalry with China. Hindering China’s progress in the sophistication of semiconductor production has become a centerpiece of current U.S. foreign policy. While the U.S. is clearly winning the semiconductor war, the picture is different when it comes to clean-energy technology. Both technology wars overlap with access to and refinement of critical raw materials (CRM), which are key upstream components of the corresponding value chains, encompassing mineral-rich emerging markets and developing economies. The way in which the U.S. and the European Union approach the goal of self-sufficiency, as well as access to and refinement of CRMs, will make a big difference to their stakes in the technology wars.
The nominal debt ceiling is a crude and rudimentary barrier against excess public debt in the United States. Hope remains that the White House and Republicans will reach a deal on raising the debt ceiling in time to avoid what Secretary Yellen called "unthinkable" and "catastrophic". Some framework to deal with fiscal matters is needed, instead of nominal spending caps. But this transition need not happen via financial shocks and a possible default on public debt.
Monetary tightening is aimed at slowing demand growth relative to aggregate supply, which will require a sustained period of below-trend US economic growth. It is in the labor market that the Fed's monetary policy script will be written. Judging by Powell's presentation last week at Brookings, and given the outstanding fears of price-wage spirals.
There are reasons to consider the US recession call as currently premature , even recognizing clear and undeniable signs of an economic growth slowdown at the margin. As suggested by the resilience of private consumption in the second quarter, the labor market remained tight. Markets have come to assign a high probability that the Fed will “pivot”, and reverse its tightening direction, given signs of an economic slowdown. It seems premature to bet on such a "pivot" by the Fed, and the recent refreshment of stock and bond markets tends to be reversed. Two points remain unclear: if the economy does indeed fall into a recession, how shallow or deep will it be? How rigid downward will the inflation rate measured by its core turn out to be?
The economic sanctions against Russia announced last week by the United States and Europe following the military invasion of Ukraine are having a profound impact on the Russian economy while also having repercussions at home. As in a boxing match, the expectation is that blows to the opponent can knock them out, despite the exposure on the punching side.
Macroeconomic dynamics in the U.S. economy has increasingly become associated with asset price fluctuations in the past few decades. Financial conditions have increasingly become an influential factor shaping the cyclical pace of the macroeconomy. There has been a mismatch between rising financial wealth and the pace of creation and incorporation of new assets. Several secular stagnation hypotheses offer explanations for the insufficient creation of new assets. Public debt—and its partial monetization by central banks—has played a stabilizing role by boosting the net supply of assets available to accommodate the demand for financial assets. The U.S. big balance sheet economy has been on a growth path highly dependent on the continuity of low real interest rates, as well as stretched price-earnings ratios of stocks and high corporate debt. Periodic episodes of downward adjustment of asset prices have been countervailed with lax monetary policies.
Market movements this month have led to renewed fears that changes in US financial and monetary conditions will trigger a painful wave of capital flight from emerging markets, as happened in 2013. But times have changed, and the greatest risks to emerging markets now lie elsewhere.
According to Treasury Secretary Janet Yellen, it would be better to run the risk of excess than insufficiency. In addition, the Federal Reserve's new monetary policy regime puts the 2% inflation target as an average, not as a ceiling forcing monetary policy to act to prevent it in advance. After a long period of inflation below 2%, even in years with low unemployment and interest rates on the floor, monetary authorities can afford to wait some time with above-average inflation until they are compelled to pull the brake.
The action of central banks has been more reactive than proactive, more reflex than cause, and in their absence, macroeconomic performance would have been even more mediocre than it has been. There is a mismatch between the trend of increasing stocks of financial wealth, occasionally cut by shocks and crises, and the creation and incorporation of new assets accompanying economic expansion. COVID-19 is helping reinforce such trends.
Data recently released on the first-quarter global domestic product (GDP) performance of major economies have showed how significant the impact of COVID-19 has been on economic activity and jobs, with large contractions across the board. The ongoing global recession is poised to be worse than the “great recession” after the 2008-09 global financial crisis, especially from the standpoint of emerging market and developing economies. The depth and speed of the GDP decline will rival that of the Great Depression of the 1930s. But how swiftly will national economies recover once the pandemic has passed? And when will that happen? That will depend on how successful the containment of coronavirus and exit strategies will be, as well as on how cost-effective will be the policies designed to deal with the negative economic effects of coronavirus.
CGTN spoke with Otaviano Canuto, a senior fellow at the Policy Center for the New South, about the current and future impact of the China-U.S. trade war on Latin America and Europe.
Will the economy fail to perform in 2020 or is a recession at hand? Otaviano Canuto, Senior Fellow at the Policy Center for the New South and Nonresident Senior Fellow at The Brookings Institution, joins me once again to discuss the last quarter of 2019 and speaks about the chances for a recession in 2020. Additionally, he talks about corporate debt and the outlook for the housing market in 2020. Wages and employment will likely feel and impact in 2020. Join me for the complete interview with Otaviano Canuto right here on The Leader Campus Voices.
The hike in tariffs imposed by the United States against its major trading partners since early 2018 has been unprecedented in recent history. President Trump alluded to, among others, the goal of revitalizing jobs in the country's manufacturing industry by protecting it from unfair trade practices of other countries, particularly China. However, according to a study by two Federal Reserve Bank staff - Aaron Flaaen and Justin Pierce - released last December 23, the effect so far has been just the opposite, i.e. a reduction in U.S. manufacturing employment!
Since the Fed’s July meeting, when the Fed Funds Rate had a 0.25% cut, fears about the impact of the US-China trade war on the global economy have escalated. The US yield curve inversion received much attention as a harbinger of a slowdown in the global and US economic outlooks. We approach here whether lights on next monetary policy events can be obtained from reading the minutes of the Fed’s meeting – and of the July meeting of the ECB governing council – released this week.