2018-08-27 09:35:00 Mon ET
treasury deficit debt employment inflation interest rate macrofinance fiscal stimulus economic growth fiscal budget public finance treasury bond treasury yield sovereign debt sovereign wealth fund tax cuts government expenditures
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.
2018-11-15 12:35:00 Thursday ET
Warren Buffett approves Berkshire Hathaway to implement new meaningful stock repurchases. Buffett sends a positive signal to the stock market with the Berks
2019-03-31 11:40:00 Sunday ET
AYA Analytica free finbuzz podcast channel on YouTube March 2019 In this podcast, we discuss several topical issues as of March 2019: (1) Sargent-Wallac
2020-07-12 08:30:00 Sunday ET
The lean CEO encourages iterative continuous improvements and collaborative teams to innovate around core value streams. Jacob Stoller (2015)
2019-08-31 14:39:00 Saturday ET
AYA Analytica finbuzz podcast channel on YouTube August 2019 In this podcast, we discuss several topical issues as of August 2019: (1) Warren B
2019-08-02 17:39:00 Friday ET
The Phillips curve becomes the Phillips cloud with no inexorable trade-off between inflation and unemployment. Stanford finance professor John Cochrane disa
2017-08-25 13:36:00 Friday ET
The U.S. Treasury's June 2017 grand proposal for financial deregulation aims to remove several aspects of the Dodd-Frank Act 2010 such as annual macro s