The Economist suggests that the world has learned few lessons of the global financial crisis from 2008 to 2009.

Becky Berkman

2018-09-07 07:33:00 Fri ET

The Economist re-evaluates the realistic scenario that the world has learned few lessons of the global financial crisis from 2008 to 2009 over the past decade. Good times breed complacency. As the Trump administration rolls back key Dodd-Frank rules and regulations, the Federal Reserve has yet to raise countercyclical capital buffers for most banks. When prudence prevails, no regulator is a perfect judge of financial risk.

The Economist points out that the current news is both good and bad. The good news suggests that most U.S. large banks finance themselves with proportionately more equity. The average bank equity capital ratio increases substantially from 3% to double digits in the decade after the Lehman financial meltdown.

However, the bad news suggests that most U.S. households, firms, and financial intermediaries react slowly to the U.S. subprime mortgage crisis from 2008 to 2009.

Former U.S. Treasury Secretary and Harvard President Larry Summers shares his ingenious insight that the U.S. economy suffers secular stagnation, government debt, and inflation in the recent decade after the global financial crisis. In light of gradual greenback appreciation and national populism, Harvard chair professor Kenneth Rogoff indicates that the Trump stock market rally may be the calm before the next financial storm.

Despite hefty Trump tax cuts and infrastructure expenditures, the U.S. economy operates near full employment with high inflation, currency, and interest rate risks. This trifecta poses a red alert to the Trump administration and its advisory troika (National Economic Council, Federal Reserve, and Treasury).

Both the U.S. Treasury and National Economic Council favor imposing draconian tariffs on at least $200 trillion Chinese imports. This trade tactic aims to help curtail bilateral trade deficits with China. These tariffs may affect Canada, Europe, Mexico, and Japan.

Moreover, the Federal Reserve accelerates the current interest rate hike (with at least one rate increase in September 2018 and another in December 2018). This hawkish interest rate hike is likely to continue until late-2019. All of these fiscal and monetary measures can help contain the high-risk trifecta of inflation, fiscal debt and deficit, and secular stagnation.

 


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

Strategic managers envision lofty purposes to enjoy incremental consistent progress over time.

Jonah Whanau

2020-10-06 09:31:00 Tuesday ET

Strategic managers envision lofty purposes to enjoy incremental consistent progress over time.

Strategic managers envision lofty purposes to enjoy incremental consistent progress over time. Allison Rimm (2015)   The joy of strategy: a bu

+See More

Leon Cooperman points out that the current Trump stock market rally now approaches normalization.

Amy Hamilton

2017-10-27 06:35:00 Friday ET

Leon Cooperman points out that the current Trump stock market rally now approaches normalization.

Leon Cooperman, Chairman and CEO of Omega Advisors, points out that the current Trump stock market rally now approaches normalization. The U.S. stock market

+See More

Berkeley professor and economist Barry Eichengreen reconciles the nominal and real interest rates to argue in favor of greater fiscal deficits.

Joseph Corr

2019-05-23 10:33:00 Thursday ET

Berkeley professor and economist Barry Eichengreen reconciles the nominal and real interest rates to argue in favor of greater fiscal deficits.

Berkeley professor and economist Barry Eichengreen reconciles the nominal and real interest rates to argue in favor of greater fiscal deficits. French econo

+See More

All of the 18 systemically important banks pass the annual Federal Reserve stress tests.

James Campbell

2019-07-30 15:33:00 Tuesday ET

All of the 18 systemically important banks pass the annual Federal Reserve stress tests.

All of the 18 systemically important banks pass the annual Federal Reserve stress tests. Many of the largest lenders announce higher cash payouts to shareho

+See More

Apple unveils 3 iPhone 11 models with new original video services and stars such as Oprah Winfrey, Jennifer Aniston, and Reese Witherspoon.

Joseph Corr

2019-10-13 16:22:00 Sunday ET

Apple unveils 3 iPhone 11 models with new original video services and stars such as Oprah Winfrey, Jennifer Aniston, and Reese Witherspoon.

Apple unveils 3 iPhone 11 models with new original video services and stars such as Oprah Winfrey, Jennifer Aniston, and Reese Witherspoon. Apple releases t

+See More

What are the best online stock market investment tools?

Amy Hamilton

2021-07-07 05:22:00 Wednesday ET

What are the best online stock market investment tools?

What are the best online stock market investment tools? Stock trading has seen an explosion since the start of the pandemic. As people lost their jobs an

+See More