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.
Financial markets are starting to get rattled by the winding down of unconventional monetary policies in many advanced economies. But such policies may not be gone for long, because a new recession or financial crisis would force central banks to deploy measures such as quantitative easing and negative interest rates once again.
In recent weeks, policymakers on both sides of the Atlantic have affirmed the financial system’s soundness and stability. And yet, it would be premature to declare victory: while some financial risks have been eliminated, others have migrated into less regulated non-bank activities.
Despite the steep drop in oil prices that began in 2014, Russia has managed to escape a deep financial crisis. But while the economy is enjoying a modest rebound after two years of deep recession, the future no longer seems as promising as its leadership thought just five years ago.
When Donald Trump announced that he was withdrawing the US from the Paris climate agreement, he argued that the accord is bad for America and "unfair" to it. In fact, the Paris accord is very good for America, and it is the US that continues to impose an unfair burden on others.
Gabriel Garcia Márquez, the Nobel laureate novelist most famous for One Hundred Years of Solitude, was native to Colombia. Nonetheless, as a master of magical realism, Garcia Márquez would have appreciated the Republic of Argentina’s recent combination of fact and fantasy.
Even if China opened its markets fully to US goods and services, the total US trade deficit would not change. But focusing on imbalances with individual countries can nonetheless lead to desirable policy changes, as the Trump administration's approach to China has shown
Though Japan’s experience since the early 1990s provides many lessons, policymakers in the rest of the world have failed miserably in heeding them. Time and again, major central banks – especially the Federal Reserve, the European Central Bank, and the Bank of England – have been quick to follow the Bank of Japan's disastrous lead.
The IMF has resurrected an old technique – commonly used in the 1980s during the Latin American debt crisis – that will allow Greece to avoid a payment default next month on debt owed to European creditors. But the Fund’s elegant compromise still leaves Greece under the shadow of an enormous debt overhang.
Economic reality is beginning to catch up with the false hopes of many Britons that the UK's withdrawal from the EU will not reduce their standard of living. The Brexit referendum cannot be undone, but people can change their minds about what their vote meant.
In the wake of the UK's snap election, how long Theresa May will survive as prime minister is impossible to predict. But in trying to anticipate the outcome of the Brexit negotiations, the questions that matter no longer have much to do with May’s political survival.
With the election of a reform-minded centrist president in France and the re-election of German Chancellor Angela Merkel seeming ever more likely, is there hope for the stalled single-currency project in Europe? Perhaps, but another decade of slow growth, punctuated by periodic debt-related convulsions, still looks more likely.
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?
Recent economic data from around the world suggest that growth could soon accelerate, now that the global economy has weathered multiple crises over the past two years. And yet the possibility of another global slowdown – if not an outright stall – cannot be ruled out.
Britain, France, the United States – which is the odd one out politically? The answer seems obvious. Last year’s Brexit referendum in the United Kingdom and the election of Donald Trump in the United States were the twin symbols of populist revolt against global elites. In Emmanuel Macron, France, by contrast, has just elected as its president the quintessential “Davos Man” – a proudly globalist technocrat identified with his country’s most elitist financial, administrative, and educational institutions.
Many observers have criticized the White House's budget plan for fiscal year 2018, owing to its optimistic assumptions about underlying economic growth. But the budget appears to be unrealistic in another crucial respect: interest rates – and thus debt-service costs – are supposed to remain low, even as full employment is reached.
Once an adapter to globalization, China is increasingly a driver of it. The Next China is becoming a Global China, upping the ante on its connection to an increasingly integrated world – and creating a new set of risks and opportunities.
One explanation for today’s stagnation focuses on growing angst about new technologies that could eventually replace many or most of our jobs, fueling massive economic inequality. People may be increasingly reluctant to spend today because they have vague fears about their employability tomorrow.
Because changing technologies and trade patterns can be both beneficial and disruptive, countries must strike a balance between the abstract principle of openness and concrete measures to limit their negative impact. To this end, policymakers should be mindful of not just how but when they implement structural reforms.
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.
Even with geopolitical conflicts proliferating around the world, global financial markets have reached new heights. But while there are many explanations for why investors might be underpricing today's risks, there is no good reason for them to ignore the possibility of another "black swan" event on the horizon.
The likely victory of Emmanuel Macron in the French presidential election has elicited a global sigh of relief. But it would be a mistake to conclude that discontent with the global economy has crested.
The IMF is optimistic about the world economy's growth prospects over the next two years. But the Fund is taking too much comfort in the stabilization of economic conditions: beneath the headline numbers, there is little evidence that underlying problems have been resolved.
With the pro-EU Emmanuel Macron seemingly headed toward the French presidency, the immediate threat to the EU and the eurozone appears to have subsided. But unless Europe addresses flaws in growth patterns and pursues urgent reforms, the longer-term risks to its survival will continue to mount.
The election called by UK Prime Minister Theresa May for June will transform Britain’s politics and its relationship with Europe, but not necessarily in the way implied by a large majority for May’s Conservatives. Britain’s pro-European progressive forces could still snatch victory from the jaws of defeat for three related reasons.
Slowly but surely, a bruised and battered global economy now appears to be shaking off its deep post-2008 malaise. But this hardly means that the world is returning to normal; on the contrary, the global growth dynamic has undergone an extraordinary transformation during the last nine years.
Reducing the US trade deficit requires Americans to save more or invest less. On their own, policies that open other countries’ markets to US products, or close US markets to foreign products, will not change the overall trade balance.
The rise of anti-globalization political movements and the threat of trade protectionism have led some people to wonder whether a stronger multilateral core for the world economy would reduce the risk of damaging fragmentation. If so, enhancing the role of the IMF's incipient global currency may be the best option.
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.
After failing to "repeal and replace" the Affordable Care Act, US President Donald Trump and congressional Republicans are now pursing tax reform, as if this will be any easier. It won’t be, as evidenced by the fact that all of the Republicans’ initial proposals are already dead in the water.
After nine dreary years of downgrading their GDP forecasts, macroeconomic policymakers around the world are shaking their heads in disbelief. Despite a populist-propelled wave of political tumult, global growth is actually set to outperform expectations in 2017.
US President Donald Trump owes his electoral victory largely to the older white middle- and working-class voters who have missed out on the benefits of economic growth over the last 30 years. But his administration's economic program will not deliver the reversal of economic fortune his key constituency was promised.
Vladimir Putin and other post-communist autocrats sell their system of “illiberal democracy” on the basis of pragmatism, not some universal theory of history. But while they have certainly been effective in stirring nationalist sentiment and stifling dissent, they have been less successful at nurturing long-term economic growth.
The global oil market is a volatile place, and the fate of countries that have treated adverse shocks as temporary and reversible, and were then proven wrong, has seldom been encouraging. Gulf producers, by going on a borrowing binge, could be setting themselves up for future pain.
The Dutch are famous for building dykes that hold back the tides and storms sweeping across the Atlantic. Have the Dutch now done it again, stopping the wave of populist politics that has been threatening to engulf Europe?
Another growth scare has come and gone for the Chinese economy, with export growth up strongly in the first two months of 2017. For the country's policymakers, the challenge now is to stay focused on executing their domestic strategy, rather than seeking to replace the US at the center of the global system.
Ongoing congressional gridlock will be the key to continued buoyancy in US equity markets, says Gavekal Dragonomics’ Anatole Kaletsky. It’s when Trump’s agenda starts to be implemented that the euphoria will wane.
The public reaction to recent proposals that robots be taxed when they replace human labor has been largely negative. But a moderate tax on robots – even a temporary levy that merely slows the adoption of disruptive technology – seems like a natural and obvious component of any policy to address rising inequality.
While financial markets seem convinced that the recent surge in business and consumer confidence in the US economy will soon be reflected in hard data, such as GDP growth, economists and policymakers remain unsure. Whether their doubts are vindicated will matter for both the US and the world economy.
The eurozone could surprise everyone with a dramatic recovery this year, says Gavekal Dragonomics’ Anatole Kaletsky, so long as populists stay out of power.
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.
The proposed border adjustment tax in the US has not seeped into public consciousness in nearly the same way as Trump’s physical wall has. But the tax-and-subsidy scheme could end up affecting the average American a lot more – and not necessarily in a good way.
US Republican leaders claim that a border-adjustment tax – which would effectively subsidize US exporters and penalize importers – would improve the US trade balance and boost domestic production, investment, and employment. They are wrong.
Since the end of World War II, America’s share of global output has fallen from nearly 30% to about 18%, yet the US dollar retains its dominant position as the world’s reserve currency – and by a solid margin. When – and how – will that change?
The island's deep and long-lasting recession has made its debt position unsustainable. But the latest fiscal plan imposed by the US commonwealth's federal overseers openly assumes that a Venezuela-scale depression will somehow bring about recovery.
Since the 2008 financial crisis, the conventional wisdom has been that a long, difficult recovery for eurozone economies will eventually lead to strong growth. But this narrative is losing credibility, as various trends suggest that Europe is trapped in a semi-permanent low-growth equilibrium.
In an ideal world, it would be nice to streamline, simplify, and even reduce tax and regulatory burdens on US businesses. But business is not the weak link in the US economic chain; workers are, because economic returns have shifted dramatically from the providers of labor to the owners of capital over the past 25 years.
The former UK leader’s recent call for voters to rethink leaving the EU is an Emperor’s New Clothes moment. Blair is now an unpopular figure, but his voice is loud enough to carry above the crowd of flatterers assuring Prime Minister Theresa May that her naked gamble with Britain’s future is clad in democratic finery.
South Africa will need much more than improved economic governance if it is to reduce inequality and achieve strong growth. In particular, the private sector must deepen its efforts to improve economic inclusion, and capitalize on the well-known benefits of greater diversity in the workforce and the boardroom.
In barely a month, US President Donald Trump has managed to spread chaos and uncertainty – and a degree of fear that would make any terrorist proud – at a dizzying pace. While most elected officials welcome being all things to all people, Trump has left no room for doubt about who he is.
