Consumers cannot carry the US economy for ever

They don’t call us dismal scientists for nothing. Nearly 75 per cent of economists surveyed in July by the National Association for Business Economics see a US recession by the end of 2021. But ask for data supporting that forecast and you get no real consensus. There are plenty of theories about trade wars. US growth has slowed. But the usual bubbles and imbalances that trigger recession aren’t yet evident. With consumption accounting for nearly 70 per cent of growth, a recession has to be transmitted through the US consumer. See my latest in the Financial Times for what that might look like.

What’s driving stock market volatility?

Stock market volatility—big swings in the prices of stocks—had actually been relatively low in the period of recovery from the financial crisis through 2017. However, that trend has been changing of late, with several incidences of volatility marked by ‘short, sharp hurricanes,’ rather than the ‘longer storms’ of the past. I discuss some of the changes in technology and financial regulation that contribute to recent volatility alongside Michael Klein, Executive Editor, EconoFact in this video.

(If you aren’t familiar with EconoFact, you need to be! EconoFact’s mission is to provide even-handed analyses of timely economic policy issues drawing on data, historical experience and well-regarded economic frameworks. With an incredible network of academics writing fact-based memos, the goal is to help combat fake news. In full disclosure I’m on the advisory board, but they are doing really interesting stuff.)

This is a currency war the US can’t possibly win

President Donald Trump’s tweeted demands for a weaker dollar, and his subsequent designation of China as a “currency manipulator”, have sparked fears that his trade battles are morphing into a currency war. The last time we had a global competitive devaluation was in the 1930s, as the world descended into the Depression. But today, currency values are set in huge global markets rather than against gold. That leaves the US alone on the battlefield, armed with only the equivalent of a pea shooter.

The US will not succeed in unilaterally weakening the dollar and could spark a global recession, raise political tensions and upend financial markets in trying. Read about it in my latest column in the Financial Times.

State of the Eurozone (and the US)

“I think in the US if we look back and think ‘what a wasted recovery,’ the Europeans are going to do it doubly. And that’s partly because there’s just a whole bunch of institutional architecture that still needs to happen in the Eurozone in order for the Euro to really be a sustainable project.”

Here’s a clear-headed, non-sensationalist view of the state of the eurozone (and the US) in an Expert View I did with Real Vision (Click here for the full video, but that one is paywalled).