The Economist highlights a trifecta of plausible explanations for better economic fortunes during the current Trump administration.

Chanel Holden

2018-08-27 09:35:00 Mon ET

President Trump and his Republican senators and supporters praise the recent economic revival of most American counties. The Economist highlights a trifecta of plausible explanations for better economic fortunes during the current Trump administration. First, some traditional industries that specialize in the extraction of non-renewable resources such as petroleum, natural gas, and even water grow faster than the overall U.S. economy. In fact, these labor-intensive ore industries tend to concentrate in conservative parts of the American political spectrum.

Second, the U.S. economy improves in the latter stages of an economic boom as firms tend to hire more low-skill workers. This trend may favor Trump-driven cities and towns.

Third, investor confidence among Trump supporters and proponents provides a psychological boost to household consumption and firm-specific investment in the form of mergers and acquisitions and capital expenditures. This positive investor sentiment can drive gradual increases in real macro variates such as employment, capital accumulation, and economic output.

A recent poll by Ipsos shows that 66% of Republicans feel more comfortable to make major purchases than 6 months ago, whereas, only 44% of Democrats feel the same way.

A recent McKinsey report delves into the current status of world economic affairs about a decade after the global financial crisis. Several punchlines arise from this broader context. First, global debt grows as the aggregate debt of governments, non-financial firms, and households has grown by $72 trillion since late-2007. Also, the global debt-to-GDP ratio has grown from 207% to 236%.

Second, government debt more than doubles from $29 trillion to $60 trillion while corporate debt also soars from $37 trillion to $66 trillion due to low interest rates. Household debt declines as a proportion of GDP in America, Britain, and Germany, but this household-debt-to-GDP ratio increases in several other OECD countries such as Australia and Canada. On balance, global household debt grows from $31 trillion to $43 trillion from late-2008 to mid-2018.

Third, many banks experience greater core capital strength as the core equity ratio rises from less than 4% in America and Europe to more than 15% in early-2018. Most banks thus have become less profitable with much lower ROEs and ROAs. In effect, financial contagion becomes less likely as a result of sharp cross-border capital retreat from $13 trillion in late-2007 to $6 trillion in early-2018.

The McKinsey report points out that corporate debt growth gives cause for pause, especially in Chinese real estate. Geopolitical flashpoints now span the nationalist movements that shed skeptical light on free trade agreements and WTO rules.

 


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

A Harvard MBA graduate Camilo Maldonado shares several life lessons and wise insights into personal finance.

James Campbell

2019-05-17 15:24:00 Friday ET

A Harvard MBA graduate Camilo Maldonado shares several life lessons and wise insights into personal finance.

A Harvard MBA graduate Camilo Maldonado shares several life lessons and wise insights into personal finance. People can leverage stock market investments an

+See More

Ford and Baidu team up to test autonomous cars in China.

Jonah Whanau

2018-11-01 08:36:00 Thursday ET

Ford and Baidu team up to test autonomous cars in China.

Ford and Baidu team up to test autonomous cars in China. For the next few years, Ford and Baidu plan to collaborate on the car design and user acceptance te

+See More

OECD cuts the global economic growth forecast from 3.5% to 3.3% for the current fiscal year 2019-2020.

Rose Prince

2019-03-27 11:28:00 Wednesday ET

OECD cuts the global economic growth forecast from 3.5% to 3.3% for the current fiscal year 2019-2020.

OECD cuts the global economic growth forecast from 3.5% to 3.3% for the current fiscal year 2019-2020. The global economy suffers from economic protraction

+See More

Amazon follows Apple to become the second U.S. public corporation to hit $1 trillion stock market valuation.

Dan Rochefort

2018-09-03 09:31:00 Monday ET

Amazon follows Apple to become the second U.S. public corporation to hit $1 trillion stock market valuation.

Amazon follows Apple to become the second American public corporation to hit $1 trillion stock market valuation. Amazon's founder and chairman Jeff Bezo

+See More

Product market competition and online ecommerce help constrain money supply growth with low inflation.

Peter Prince

2019-09-25 15:33:00 Wednesday ET

Product market competition and online ecommerce help constrain money supply growth with low inflation.

Product market competition and online e-commerce help constrain money supply growth with low inflation. Key e-commerce retailers such as Amazon, Alibaba, an

+See More

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Amazon (U.S. stock symbol: $AMZN).

Dan Rochefort

2025-09-14 14:23:00 Sunday ET

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Amazon (U.S. stock symbol: $AMZN).

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fund

+See More