Debt

Could this be the death of the dollar?

philmullan Changing world order, Debt, Geopolitics, Trade

The single most important prop sustaining the US economy today is the global power of the dollar. America’s current relative prosperity (which until recently was dubbed ‘US exceptionalism’) rests far more on the role of its currency than on its tech companies, abundant resources or famed entrepreneurial spirit. Because the dollar is accepted as world money, when the American state and its corporations spend or borrow abroad, foreigners have been willing buyers. This has enabled a seemingly endless flow of cheap money to support the economy at home.

Today, however, this special benefit is looking increasingly vulnerable. And the greatest threat to the dollar’s status doesn’t come from Russia or China or even Europe, but from the US government’s own actions.

Read the full article here.

This is a financial crisis waiting to happen

philmullan Debt, Economic policy, State intervention, Zombie economy

The collapse of Silicon Valley Bank and Credit Suisse this month ought to be a wake-up call. The fall of these two very different banks points to a deeper underlying malaise in the world’s advanced economies.

Some have blamed the West’s leading central banks, especially the US Fed, for SVB and Credit Suisse’s demise. They claim that central bankers’ decision to delay interest rate rises, only to rise them aggressively as inflation began to spiral last year, made things very tough for the likes of SVB. But blaming these banks’ collapse on an interest-rate hike ignores the deeper problem. The truth is that Western economies have been held afloat artificially since the 2008 financial crisis, courtesy of super-easy monetary policies. And now we’re starting to pay the price.

Read the full article here.

Britain’s zombie economy stands exposed

philmullan Debt, Economic growth, Economic policy, Politics, Productivity, Zombie economy

Britain is in the grip of financial turmoil. Over the past week, the pound has crashed and rallied, as has the bond market. Pension funds, at one point, looked to be on the brink of collapse, prompting an emergency intervention from the Bank of England. All this has followed last week’s now globally infamous mini-budget, unveiled by prime minister Liz Truss and chancellor Kwasi Kwarteng. While there is no doubt that this incoherent budget acted as a trigger, it is not the underlying cause of Britain’s woes. It simply brought the UK economy’s underlying fragilities to the fore. There’s more to this market meltdown than Truss and Kwarteng’s hapless ‘mini-budget’.

Read the full article here.

The cost-of-living crisis has been decades in the making

philmullan Debt, Inflation, Politics, Productivity, The longest depression

The soaring cost of living, aggravated now by the fallout from the war in Ukraine, is bringing dreadful difficulties and hardship for huge numbers of people. This is the latest in a long series of economic crises which successive governments have been unable to manage effectively. How can Britain stop stumbling from one crisis to the next? By escaping from the sustained underinvestment and rising borrowing that have left Britain trapped in the Long Depression and that have robbed governments of the slack they should have to help people get through such challenges.

Read the full article here.

Shutdown: the end of an economic era?

philmullan capitalism, Covid-19, Debt, Green agenda, Politics

Particular crises rarely change everything by themselves, but they can amplify what was already underway. This is how economic historian Adam Tooze approaches the Covid crisis in Shutdown: How Covid Shook the World’s Economy. He presents it as an event that brought pre-existing trends to the surface.

Shutdown is one of the first extended economic histories of the pandemic. It covers a single year, from Chinese president Xi Jinping’s public acknowledgment of the outbreak of a novel coronavirus in January 2020 to US president Joe Biden’s inauguration exactly 12 months later. The bulk of Shutdown is a comprehensive month-by-month commentary on the progression of the pandemic, the varied government responses to it and the economic, financial and political fallout.

Read the full review here of Adam Tooze’s new book Shutdown: How Covid Shook the World’s Economy.