Readers of the IMF’s latest annual review of the US economy will be startled to learn that, in the Fund’s estimation, US government debt is on a sustainable path. That assessment makes sense – but it is only as good as the assumptions that underpin it.
The dollar's strength, particularly against major Asian currencies, has triggered a wave of skittishness in financial markets. Can anything be done to stem the greenback's rise, and even if something can be done, should it?
Critics of the Federal Reserve argue that the acceleration of US inflation in early 2021, and the rapid disinflation of recent months, had nothing to do with monetary policy, because the sources of above-target price growth were all on the supply side. This view is both right and too simple.
If global growth resumes in 2021, aided by the rollout of vaccines and the Fed’s continued commitment to ultra-low interest rates, some developing countries may be able to avoid default, because yield-hungry investors will continue to buy their bonds. But other countries will not be so lucky.
US President Donald Trump wants to compress the United States trade deficit and enhance the competitiveness of domestic manufacturers by using tariffs to raise the price of imported goods. And the fixed exchange rates he needs to achieve that goal are the real reason behind his nomination of Judy Shelton to the Federal Reserve Board.
While having a president with specialized training as a monetary economist would benefit the European Central Bank, such training is not essential. If Christine Lagarde is confirmed for the position, Europe will learn that other attributes matter much more.
Defenders of central-bank independence argue that quantitative easing should have been avoided last time and is best avoided in the future, because it opens the door to political interference with the conduct of monetary policy. But political interference is even likelier if central banks shun QE in the next recession.
The US Federal Reserve's pause on further monetary-policy tightening has fueled a revival of capital inflows. But, given the uncertainties about US policy and Chinese growth prospects, it is too early to conclude that emerging economies are out of the woods.
The problems with the latest wave of cryptocurrencies will be familiar to anyone who has encountered even a single study of speculative attacks on pegged exchange rates, or to anyone who has had a coffee with an emerging-market central banker. But this doesn’t mean that the flaws in these schemes will be familiar to investors.
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.
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.
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.
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.
While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technical change, has been stagnating since 2005 in the US and across the advanced-country world.
Today, central banks are under attack for missing their inflation targets, failing to maintain financial stability or restore it in transparent ways, and ignoring the global repercussions of their policies. But compromising central bank independence in order to enhance political accountability would be to throw the baby out with the bathwater.
Pundits have been saying last rites for the dollar’s global dominance since the 1960s – that is, for more than half a century now. But the pundits may finally be right, because the greenback's dominance has been sustained by geopolitical alliances that are now fraying badly.
Just prior to the Brexit referendum, then-UK justice secretary Michael Gove dismissed dire warnings of an economic meltdown following a "Leave" vote by stating, "The people of this country have had enough of experts." And, indeed, the experts seemed to have been proved wrong – until now.
This month marks the 20th anniversary of the Asian financial crisis. While such milestones are not exactly cause for celebration, they at least afford an opportunity to look back and examine what has changed – and, no less important, what hasn’t.
This is a good time to remember that the US is a federal system, not a unitary state with an all-powerful central government. So, can Americans who oppose the contraction of social programs and revocation of progressive federal legislation use US states’ authority to counter these trends?
Donald Trump thinks Germany's massive current-account surplus reflects currency manipulation and import restrictions. But, while the German external balance is indeed a problem, the best way to address it has nothing to do with the exchange rate or trade policy.
Donald Trump’s comments about China during the US presidential campaign didn’t exactly bolster high hopes for Sino-American relations once he was elected. But the two leaders' summit at Mar-a-Lago showed that even a president as reckless as Trump knows that the US cannot afford to antagonize the Chinese.
Donald Trump took office promising a raft of sweeping economic-policy changes. He has quickly discovered, like previous US presidents, that America’s political system is designed to prevent rapid, large-scale change, by interposing formidable institutional obstacles.
US President Donald Trump did not take office as a committed multilateralist. But even a president committed to putting “America first” now seems to recognize – at least with respect to NATO – that a framework through which countries can pursue shared goals is not a bad thing.
Understanding the political success of US President-elect Donald Trump is not easy, and there have been many glib comparisons with earlier populist US politicians, from Huey Long to George Wallace. But the most revealing comparison may be with an historical figure from another country: the British nativist firebrand Enoch Powell.
The year 2017 will mark the 40th anniversary of the publication of John Kenneth Galbraith’s The Age of Uncertainty. But if Galbraith were writing the same book in 2017, he probably would call the 1970s the Age of Assurance.
Determining causality in economics may be elusive, but in the case of world trade it is clear: slower growth is the result of slower global GDP growth, not the other way around. And slower growth in international flows of financial capital may be just what the global economy needs.
