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

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

Donald Trump and Kim Jong Un meet, talk, and shake hands in the historic U.S.-North-Korean peace summit in Singapore.

Daphne Basel

2018-06-06 09:39:00 Wednesday ET

Donald Trump and Kim Jong Un meet, talk, and shake hands in the historic U.S.-North-Korean peace summit in Singapore.

Donald Trump and Kim Jong Un meet, talk, and shake hands in the historic peace summit between America and North Korea in Singapore. At the start of the bila

+See More

Millennials can save to make a fortune with compound interest over 40 years.

Laura Hermes

2017-07-25 10:44:00 Tuesday ET

Millennials can save to make a fortune with compound interest over 40 years.

NerdWallet's new simulation suggests that a 25-year-old millennial who earns an inflation-free base salary of $40,456 and saves 15% each year faces a 99

+See More

Andy Yeh Alpha (AYA) fintech network platform: major milestones, key product features, and online social media services

Joseph Corr

2024-01-10 08:24:00 Wednesday ET

Andy Yeh Alpha (AYA) fintech network platform: major milestones, key product features, and online social media services

  Andy Yeh Alpha (AYA) fintech network platform: major milestones, key product features, and online social media services   Introduction

+See More

America faces income inequality, political polarization, and dysfunctional governance.

Rose Prince

2018-05-17 07:41:00 Thursday ET

America faces income inequality, political polarization, and dysfunctional governance.

Has America become a democratic free land of crumbling infrastructure, galloping income inequality, bitter political polarization, and dysfunctional governa

+See More

Due to U.S. tariffs, Apple, Nintendo, and Samsung start to consider making tech products in Vietnam instead of China.

Jonah Whanau

2019-09-03 14:29:00 Tuesday ET

Due to U.S. tariffs, Apple, Nintendo, and Samsung start to consider making tech products in Vietnam instead of China.

Due to U.S. tariffs and other cloudy causes of economic policy uncertainty, Apple, Nintendo, and Samsung start to consider making tech products in Vietnam i

+See More