The modern world's most powerful nations, America and China, stumble into a Thucydides trap.

Fiona Sydney

2018-05-29 11:40:00 Tue ET

America and China, the modern world's most powerful nations may stumble into a **Thucydides trap** that Harvard professor and political scientist Graham Allison suggests in his recent book on Sino-U.S. relations. Through the lens of an ancient Greek military chief and historian, the Thucydides trap refers to the key notion that significant shifts in the relative strength of major powers can be a primary cause of bilateral conflict.

Financial market observers and economic media commentators may characterize superficial frictions and flashpoints as the key root cause of both bilateral animosity and hostility. Nevertheless, the real cause of bilateral conflict, or an open Sino-U.S. trade war, might reflect the fear and frustration of political leaders Trump and Xi on both sides. Allison hence emphasizes that if a Sino-American war is not inevitable, an open trade conflict is likely to emerge as a negative disequilibrium outcome in the medium run.

In recent times, the TIME magazine demystifies the 5 major myths that investors seem to misconstrue as new trends and inflection points in the U.S. stock market. Investor worries and concerns arise from volatile asset price gyrations, pervasive tech stock slumps, inflationary price pressures, faster Fed interest rate hikes and their overall adverse impact on real GDP economic output and employment, and a pervasive regime switch of investor favor from stocks to bonds and alternative investment vehicles such as credit default swaps (CDS) and many other financial derivatives.

TIME demystifies the common myths and puzzles from a fundamental perspective. The Federal Reserve accelerates the current interest rate hike at the neutral threshold that helps contain inflation when the U.S. economy operates near full employment. Fiscal stimulus effectuates in the form of both Trump tax cuts and infrastructure expenditures. It takes time for these fiscal measures to drive positive progress in real economic covariates such as real GDP economic output, capital investment, employment, and technological innovation. These economic insights shine new light on the current Sino-American bilateral trade relations and financial market conditions in the broader context of significant shifts in the relative strength of these major powers.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Elon Musk envisions a bold fantastic future with his professional trifecta of lean enterprises SolarCity, SpaceX, and Tesla.

Joseph Corr

2020-04-10 11:33:00 Friday ET

Elon Musk envisions a bold fantastic future with his professional trifecta of lean enterprises SolarCity, SpaceX, and Tesla.

Elon Musk envisions a bold fantastic future with his professional trifecta of lean startup enterprises SolarCity, SpaceX, and Tesla. Ashlee Vance (2015)

+See More

The U.S. stock market delivers a hefty long-term average return of 11% per annum.

Peter Prince

2017-03-09 05:32:00 Thursday ET

The U.S. stock market delivers a hefty long-term average return of 11% per annum.

From 1927 to 2017, the U.S. stock market has delivered a hefty average return of about 11% per annum. The U.S. average stock market return is high in stark

+See More

Fed Chair Jay Powell suggests that the recent surge in U.S. business debt poses moderate risks to the economy.

Laura Hermes

2019-06-05 10:34:00 Wednesday ET

Fed Chair Jay Powell suggests that the recent surge in U.S. business debt poses moderate risks to the economy.

Fed Chair Jay Powell suggests that the recent surge in U.S. business debt poses moderate risks to the economy. Many corporate treasuries now carry about 40%

+See More

New Keynesian monetary policy framework

Monica McNeil

2023-09-21 09:26:00 Thursday ET

New Keynesian monetary policy framework

Jordi Gali delves into the science of the New Keynesian monetary policy framework with economic output and inflation stabilization. Jordi Gali (2015)

+See More

President Trump allows most JFK files to be released to the general public.

James Campbell

2017-09-25 09:42:00 Monday ET

President Trump allows most JFK files to be released to the general public.

President Trump has allowed most JFK files to be released to the general public. This batch of documents reveals many details of the assassination of Presid

+See More

PwC releases a new study of top innovators worldwide as of November 2018.

Daphne Basel

2018-11-07 08:30:00 Wednesday ET

PwC releases a new study of top innovators worldwide as of November 2018.

PwC releases a new study of top innovators worldwide as of November 2018. This study assesses the top 1,000 global companies that spend the most on R&D

+See More