In a sharp departure from this time last year, the global economy is now being buffeted by growing concerns over US President Donald Trump’s trade war, fragile emerging markets, a slowdown in Europe, and other risks. It is safe to say that the period of low volatility and synchronized global growth is behind us.
.. In 2017, the world economy was undergoing a synchronized expansion, with growth accelerating in both advanced economies and emerging markets. Moreover, despite stronger growth, inflation was tame – if not falling – even in economies like the United States, where goods and labor markets were tightening... Stronger growth with inflation still below target allowed unconventional monetary policies either to remain in full force, as in the eurozone and Japan, or to be rolled back very gradually.. Markets gave US President Donald Trump the benefit of the doubt during his first year in office; and investors celebrated his tax cuts and deregulatory policies. Many commentators even argued that the decade of the “new mediocre” and “secular stagnation” was giving way to a new “goldilocks” phase of steady, stronger growth... Though the world economy is still experiencing a lukewarm expansion, growth is no longer synchronized. Economic growth in the eurozone, the United Kingdom, Japan, and a number of fragile emerging markets is slowing... while the US and Chinese economies are still expanding, the former is being driven by unsustainable fiscal stimulus...with the US economy near full employment, fiscal-stimulus policies, together with rising oil and commodity prices, are stoking domestic inflation... the US Federal Reserve must raise interest rates faster than expected, while also unwinding its balance sheet... the prospect of higher inflation has led even the European Central Bank to consider gradually ending unconventional monetary policies, implying less monetary accommodation at the global level. The combination of a stronger dollar, higher interest rates, and less liquidity does not bode well for emerging markets... Despite strong corporate earnings – which have been goosed by the US tax cuts – US and global equity markets have drifted sideways in recent months... The danger now is that a negative feedback loop between economies and markets will take hold. The slowdown in some economies could lead to even tighter financial conditions in equity, bond, and credit markets, which could further limit growth... Since 2010, economic slowdowns, risk-off episodes, and market corrections have heightened the risks of stag-deflation (slow growth and low inflation); but major central banks came to the rescue with unconventional monetary policies as both growth and inflation were falling... These risks include the negative supply shock that could come from a trade war; higher oil prices, owing to politically motivated supply constraints; and inflationary domestic policies in the US... this time the Fed and other central banks are starting or continuing to tighten monetary policies, and, with inflation rising, cannot come to the markets’ rescue this time.Another big difference in 2018 is that Trump’s policies are creating further uncertainty. In addition to
- launching a trade war, Trump is also
- actively undermining the global economic and geostrategic order that the US created after World War II.
.. the Trump administration’s modest growth-boosting policies are already behind us, the effects of policies that could hamper growth have yet to be fully felt. Trump’s favored fiscal and trade policies will crowd out private investment, reduce foreign direct investment in the US, and produce larger external deficits.
- His draconian approach to immigration will diminish the supply of labor needed to support an aging society.
- His environmental policies will make it harder for the US to compete in the green economy of the future.
- And his bullying of the private sector will make firms hesitant to hire or invest in the US.
.. Even if the US economy exceeds potential growth over the next year, the effects of fiscal stimulus will fade by the second half of 2019, and the Fed will overshoot its long-term equilibrium policy rate as it tries to control inflation; thus,
achieving a soft landing will become harder.
.. By then, and with protectionism rising, frothy global markets will probably have become even bumpier, owing to the serious risk of a growth stall – or even a downturn – in 2020.
.. With the era of low volatility now behind us, it would seem that the current risk-off era is here to stay.
After You, Mr. Putin
Live in Helsinki, Trump brings his blame-America-first tour to a close.
.. let me admit that my absolute top take away was that at a critical moment in modern American history, our president managed to mention his winning margin in the Electoral College.Bret: Also, I’m thinking about just what Sean Hannity, Laura Ingraham and the rest of right-wing punditry would be saying if it had been President Barack Obama at that podium, saying the sort of things Trump was saying, not to mention the way he said it.
.. They’d call him the Manchurian Candidate. They’d accuse him of treason. They’d call for an armed insurrection or something close to it. They’d say he hates America. And they wouldn’t be wrong. Here is a president of the United States who repeatedly blames America first; who takes the word of a former K.G.B. agent over his own intelligence agencies; who promises to work constructively with a despot whose regime
- kills journalists,
- shoots down civilian airliners and
- uses nerve agents to assassinate its enemies abroad;
and who aims his rhetorical fire on an opposing party instead of an enemy government. And the Make America Great Again crowd, with an exception or two, says pretty much nothing, or averts its gaze, or switches the subject.
.. John Brennan has noted, “people who go along a treasonous path do not know they are on a treasonous path until it is too late.”
.. The thought that the government — our government — just put this child through that trauma for no other reason than Jeff Sessions’ fantasy that it will “deter” desperate migrants or otherwise help Stephen Miller work out his manhood issues turns my stomach as nothing else has in a long time. That a majority of Republicans support the policy turns it even more.
In some ways, this worries me a lot more than whatever Putin and his cyber-armies might be trying to do to us. Putin is a former KGB agent, so at least he’s playing to type. It’s the trashing of democratic values from the inside that concerns me even more.
.. During his press conference in the U.K. with Theresa May, he warned Europe to watch out for immigration because it was “changing the culture.” It was such a pathetic call for racism to rise up. And then of course he blamed Sadiq Khan, London’s Muslim mayor, for encouraging terrorism.
.. I guess that, as horrific as I find the stories about those poor kids being tormented at the border, I’m even more disturbed by the way our president is trying to promote this kind of ideology around the world.
.. it’s also important to understand why they’ve gained so much strength recently. The key is their ability to traffic in half-truths, to pick up on a legitimate issue and put it to an illegitimate end.
.. That’s why I think calls in the United States to “abolish ICE” are so dangerous: They create the impression that Democrats want unregulated migration, as opposed to a generous but lawful immigration policy. And that just helps Trump and the Bannonites.
.. Gail: For most Democrats, “abolish ICE” is just shorthand for getting rid of the Trump anti-immigration agenda. Although I do agree we could use a better code. Perhaps involving a quote from the Statue of Liberty.
.. in California, their state of nearly 40 million people is only going to be represented by two senators, which is exactly the same number as Wyoming, population 579,315. I keep harping on the fact that the real division in this country is between the empty-places people and the crowded-places people. Us crowded folk are virtually disenfranchised.
.. I think Democrats need to find a way to change the conversation about immigration, in two ways. First, stop feeding the perception that immigration is an act of humanitarianism by the United States. It’s a matter of self-interest: Newcomers mainly bring energy and drive and imagination and ambition to this country. Second, accept the premise that we need to police our borders, while making the case that we can police them better with a much more liberal system that diminishes the incentive to come into the country illegally.
.. Gail: And maybe we can get somebody from Mar-a-Lago to testify on how hard it is to get affordable help.
How Anti-Immigration Passion Was Inflamed From the Fringe
In January 2015, when few were watching, Mr. Sessions wrote a 23-page memo that predicted that the next president would most likely be a Republican who spoke to the working class about how immigrants had stolen their jobs.
.. Most mainstream politicians ignored the memo, but its contents influenced Mr. Trump. At a raucous 2015 rally in Mobile, Ala., he sensed the power of the immigration issue as a crowd of 30,000 supporters roared with approval at his promise to build a wall across the southern border and crack down on illegal immigration.
.. By then Mr. Sessions and Mr. Miller were the architects of the immigration agenda of the long-shot Trump campaign. In 2016, Mr. Sessions endorsed Mr. Trump for president — his first ever endorsement of a candidate in a primary — and Mr. Miller did as well.
.. Both men have something else in common: They are largely unfazed by criticism or bad press.
Mr. Sessions is known for proudly holding opinions thought to be retrograde. Under his high school yearbook photo was the caption: “He is a host of debaters in himself.” While serving as Alabama’s attorney general, he supported reviving chain gangs of volunteer inmates and tighter identification requirements for Alabama voters.
.. Mr. Miller is similarly immune to critiques from establishment Republicans, who often view his immigration positions as far out of the mainstream and politically dangerous. In the recent interview, Mr. Miller dismissed as ignorant the hand-wringing of Republicans about the family separation controversy.
.. “You have one party that’s in favor of open borders, and you have one party that wants to secure the border,” Mr. Miller said. “And all day long the American people are going to side with the party that wants to secure the border. And not by a little bit. Not 55-45. 60-40. 70-30. 80-20. I’m talking 90-10 on that.”
.. Mr. Sessions urged lawmakers to pass legislation to build a wall along the southern border and impose new restrictions on immigration that he said would end legal “loopholes” that let illegal immigrants in.
“If we build the wall, if we pass legislation to end the lawlessness,” Mr. Sessions said, “we won’t face these terrible choices.”