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

The Economist interviews President Trump and spots the keyword *reciprocity* from trade to taxation.

Amy Hamilton

2017-07-01 08:40:00 Saturday ET

The Economist interviews President Trump and spots the keyword *reciprocity* from trade to taxation.

The Economist interviews President Donald Trump and spots the keyword *reciprocity* in many aspects of Trumponomics from trade and taxation to infrastructur

+See More

Angus Deaton analyzes the correlation between health and wealth in light of the economic origins of inequality worldwide.

James Campbell

2023-04-21 12:39:00 Friday ET

Angus Deaton analyzes the correlation between health and wealth in light of the economic origins of inequality worldwide.

Angus Deaton analyzes the correlation between health and wealth in light of the economic origins of inequality worldwide. Angus Deaton (2015)  

+See More

San Francisco Fed CEO Mary Daly suggests that trade escalation is not the only risk in the global economy.

Rose Prince

2019-06-19 09:27:00 Wednesday ET

San Francisco Fed CEO Mary Daly suggests that trade escalation is not the only risk in the global economy.

San Francisco Fed CEO Mary Daly suggests that trade escalation is not the only risk in the global economy. Due to the current Sino-U.S. trade tension, the g

+See More

Berkeley tax economists Gabriel Zucman and Emmanuel Saez find fresh insights into wealth inequality in America.

Jacob Miramar

2019-06-27 10:39:00 Thursday ET

Berkeley tax economists Gabriel Zucman and Emmanuel Saez find fresh insights into wealth inequality in America.

Berkeley tax economists Gabriel Zucman and Emmanuel Saez find fresh insights into wealth inequality in America. Their latest estimates show that the top 0.1

+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 T-Mobile (U.S. stock symbol: $TMUS).

James Campbell

2025-10-06 10:27:00 Monday 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 T-Mobile (U.S. stock symbol: $TMUS).

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

Michael Woodford provides the theoretical foundations of monetary policy rules in ever more efficient financial markets.

Fiona Sydney

2023-09-07 11:30:00 Thursday ET

Michael Woodford provides the theoretical foundations of monetary policy rules in ever more efficient financial markets.

Michael Woodford provides the theoretical foundations of monetary policy rules in ever more efficient financial markets. Michael Woodford (2003)  

+See More