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

Federal Reserve proposes to revamp post-crisis rules for U.S. banks.

Joseph Corr

2019-04-19 12:35:00 Friday ET

Federal Reserve proposes to revamp post-crisis rules for U.S. banks.

Federal Reserve proposes to revamp post-crisis rules for U.S. banks. The current proposals would prescribe materially less strict requirements for community

+See More

With prescient clairvoyance, Bill Gates predicted the recent rise of Facebook and Netflix.

Monica McNeil

2017-02-07 07:47:00 Tuesday ET

With prescient clairvoyance, Bill Gates predicted the recent rise of Facebook and Netflix.

With prescient clairvoyance, Bill Gates predicted the recent sustainable rise of Netflix and Facebook during a Playboy interview back in 1994. He said th

+See More

Mario Draghi declares the ECB agreement on a thorny set of revisions to Basel 3.

Rose Prince

2017-11-25 06:34:00 Saturday ET

Mario Draghi declares the ECB agreement on a thorny set of revisions to Basel 3.

Mario Draghi, President of the European Central Bank, heads the international committee of financial supervisors and has declared their landmark agreement o

+See More

Warren Buffett shares his fresh economic insights and value investment strategies at the Berkshire Hathaway shareholder forum.

Daphne Basel

2018-05-05 07:33:00 Saturday ET

Warren Buffett shares his fresh economic insights and value investment strategies at the Berkshire Hathaway shareholder forum.

Warren Buffett shares his fresh economic insights and value investment strategies at the Berkshire Hathaway shareholder forum in May 2018 despite the new GA

+See More

President Trump now agrees to cease fire in the trade conflict with the European Union.

Laura Hermes

2018-07-23 07:41:00 Monday ET

President Trump now agrees to cease fire in the trade conflict with the European Union.

President Trump now agrees to cease fire in the trade conflict with the European Union. Both sides can work together towards *zero tariffs, zero non-tariff

+See More

Thomas Sowell argues that some economic reforms inadvertently exacerbate economic disparities.

Daisy Harvey

2023-11-14 08:24:00 Tuesday ET

Thomas Sowell argues that some economic reforms inadvertently exacerbate economic disparities.

Thomas Sowell argues that some economic reforms inadvertently exacerbate economic disparities. Thomas Sowell (2019)   Discrimination and econo

+See More