International Monetary Fund Managing Director Christine Lagarde is raising alarm bells about the health of the global economy, saying international growth may have plateaued.
“For most countries, it has become more difficult to deliver on the promise of greater prosperity, because the global economic weather is beginning to change,” Ms. Lagarde said in a speech in Washington on Monday.
.. While other emerging-market currencies, from Indonesia’s to South Africa’s, have also experienced difficult declines this year, most emerging markets have avoided the acute turmoil of Turkey and Argentina.
If the crisis spreads, as some fear, capital could flood out of emerging markets, Ms. Lagarde warned, saying that IMF economists had estimated emerging markets could face up to $100 billion in portfolio outflows. In recent years, about $240 billion per year had flowed into those countries, so a $100 billion outflow would be a dramatic reversal.
.. Ms. Lagarde said another mounting concern is that threats to impose new trade restrictions have been carried out in a number of countries.
“A key issue is that rhetoric is morphing into a new reality of actual trade barriers,” Ms. Lagarde said. “This is hurting not only trade itself, but also investment and manufacturing as uncertainty continues to rise.”
.. countries have continued to pile on debt, which has tended to foretell slower growth in years ahead as the burden of debt service mounts. The total debt of the private sector has reached an “all-time high of $182 trillion,” Ms. Lagarde said, noting that the figure was 60% higher than in 2007.
For Trump, Power and Values Matter Less Than Dollars and Cents
Why would an American president offend allies and cozy up to adversaries?
If there was an answer in Mr. Trump’s tumultuous week on the global stage, it may be that he disregards the traditional preoccupations of American foreign policy — power and values — in favor of a more narrow worldview shaped by his experience as a businessman.
Mr. Trump’s bitter clashes with Canada and Europe over trade, as well as his solicitous courtship of North Korea’s brutal dictator, all reflect this mercantile perspective. In his transactional approach to foreign policy, considerations of financial profit or cost — often measured in ways that economists deem simplistic — can outweigh virtually any other consideration.
.. Trump, like a lot of businessmen, doesn’t pay much attention to Canada, or Europe, or Japan,” Mr. Bader said. “Businessmen pay attention to the growth markets: Vietnam, Brazil, India, China.”
.. A slick promotional video that Mr. Trump showed Mr. Kim sketched out a gleaming vision of a prosperous, nuclear-free North Korea, with swooping construction cranes and high-speed trains.
.. ”They have great beaches,” Mr. Trump said to reporters. “You see that whenever they’re exploding their cannons into the ocean, right? I said, ‘Boy, look at the view. Wouldn’t that make a great condo behind?’ And I explained, I said, ‘You know, instead of doing that, you could have the best hotels in the world right there.’”
.. Mr. Trump considers it a prime location amid booming economies. “Think of it from a real-estate perspective,” he said.
.. “We save a fortune by not doing war games, as long as we are negotiating in good faith — which both sides are!” Mr. Trump said on Twitter.
.. The president expressed particular spite at the B-52 bombers that the United States has flown over South Korea in missions from Guam.
.. a potent manifestation of the American commitment to protect its Asian allies. But to Mr. Trump, they burn a lot of fuel and serve little purpose
.. “I know a lot about airplanes,” he said. “It’s very expensive.”
.. Asked on Tuesday about his clash with Mr. Trudeau after the Group of 7 meeting in Quebec, he answered with a long list of grievances — some based on erroneous data — about the trade deficits the United States runs with Canada, Germany, and other allies.
.. “They don’t take our agricultural products, barely. They don’t take a lot of what we have and yet they send Mercedes into us. They send BMWs into us by the millions. It’s very unfair.”
.. If anything, experts said, this common history is a red flag to Mr. Trump.
.. A consistent theme of the Trump administration has been to downgrade the value of allies and alliances,”
.. “To the contrary, they tend to be judged as military free-riders or economic rivals or both. That many are assertive, independent-minded liberals that regularly challenge the president only makes it worse.”
.. In his single-minded focus on economic gain
.. “The bottom line,” said Daniel R. Russel, a former assistant secretary of state for East Asian affairs now at the Asia Society, “is that President Trump paid retail for a few warmed-over promises and appears to have given away both leverage and deterrence.”
.. “The containment doctrine has given way to the condominium doctrine.”
Flood of Dollar Debt Could Come Back to Haunt Emerging Economies
Emerging-market companies are binging on U.S. dollar debt and that could become a source of trouble in some parts of the world if growth slows, interest rates rise or the dollar resumes its ascent.
.. U.S. dollar debt stood at $3.6 trillion in emerging markets through the third quarter of 2016, an all-time high
.. a bout of investor risk aversion could expose $135 billion worth of corporate credit to repayment problems.
.. If the dollar appreciates faster than expected, some corporate borrowers, especially those who derive their revenues largely in local currencies, could find themselves in a currency mismatch and be forced to ask the central bank for help—which not all central banks are positioned to do.
.. Countries such as India and the Philippines, which have relatively low stocks of external debt and healthy foreign-exchange reserves, are in better shape, analysts say. Economies such as Malaysia and South Africa, which have small currency reserves and high levels of dollar-denominated debt, are at particular risk. Venezuela and Turkey look especially vulnerable.
.. Venezuela’s state-run oil company PdVSA was late on its coupon payments worth $404 million in November, in an apparent struggle against low oil prices and falling foreign-exchange reserves.
.. “There are potential vulnerabilities looking further ahead, particularly if the Fed were to raise rates much more aggressively than what the market has priced at the moment,”