San Diego — In the modern economy there is a dirty little secret: the United States has benefited — and continues to go — the global recession. The American economy is moving forward vigorously, and even when the protesters in the UK pour milkshakes ideologues of Brexia, the President of France Emmanuel Makron marching to oppose the nihilists in the yellow vests, and Chinese technology companies like Huawei, are afraid that they will deny access to foreign markets.
Last year the US economy grew by 2.9%, while the Eurozone is only 1.8%, which only strengthened the confidence of the President of Donald trump in his confrontational leadership style. However, the relatively strong pace of economic growth in the United States on the background of their sluggishness in the rest of the countries failed to meet the standard predictions from the Economics textbooks. Did something happen with a tightly integrated world economy, which the international monetary Fund and the world Bank to protect since the Second world war (and more recently even praised)?
The US economy is temporary but very powerful stage, when the weak economy abroad increases spirit within the country. However, this economic euphoria has nothing to do with the dangerous games of the era of trump, but strongly tied to interest rates.
The cost of borrowing is lower now than ever since the founding of the US Federal reserve in 1913, and in the case of the United Kingdom — since the founding of the Bank of England in 1694. The yield on ten-year U.S. Treasury bonds equals 2,123%, and in April, the video streaming service Netflix has issued junk bonds with a rate of only 5.4 percent.
If the economist had fallen asleep like Rip van Winkle for several decades, suddenly woke up today and only saw these numbers, he or she would assume that about 20% of Americans became unemployed and stand in line for free soup for the poor. In reality, however, the unemployment rate in the US is now at its lowest level since Neil Armstrong made the first famous step on the moon’s surface 50 years ago.
The idea that the United States benefit from the downturn in the global economy, might sound like a sardonic thought some incorrigible Marxist in a shabby corner of the room for teachers. But this opinion is not ideological. The fact that global interest rates scratching along the bottom because GDP growth outside the US is so sluggish.
Persistently low interest rates and a weak pace of inflation bring many benefits to the U.S. economy. To begin with, the American consumer, whose real (inflation-adjusted) wages finally began to grow after decades of stagnation, began to offer a variety of deals. A few days ago when I went to the store “Apple” (Apple), service repair said I could buy a new IPhone (iPhone) in installments with 0% interest rate. A zero interest rate, also offer auto dealers.
In addition, the US stock market has grown so much because the yield on Bank certificates of Deposit (CD) is extremely pathetic. When I was a kid in the 1970s, my mom put our family savings in the Bank and not only got a yield of 6%, but also a blender. And today a six-month Bank CD bring only a third of a percentage point. And my mom can no longer rely on blender or even a candy from the Bank in exchange for the placement there of their money.
Finally, low interest rates mean that American businesses have the opportunity to get nearly free financing when buying equipment. Due to the low cost of borrowing and new tax deductions, the American economy added 215 thousand jobs in mechanical engineering in 2018. And foreign investors realize that the new equipment will make American companies more competitive.
Yes, of course, the textbooks insist that the lethargy of the world economy will reduce American exports. And this is true especially in combination with the new duties on American goods, which have entered China, and the strengthening of the dollar, which increases the cost of American exports abroad.
However, the share of exports accounts for only 12% of the us economy, and nearly a third of the exports go to Canada and Mexico, and their economy is in normal condition. In addition, many of the most valuable items of American exports — objects that are “mandatory” use (that is, oligopolistic goods that produce only a few companies), for example, the aircraft “Boeing” (Boeing), chips “of Qualcomm” (Qualcomm) or phone the Apple iPhone. Even tortured zatoskoval the French or the Germans it would be hard to do.
Cheerful attitude of the American economy worries politicians in other countries. They would prefer that the USA also slowed down next to them and were forced to invent collaborative ways to increase the growth of the global economy. Instead, trump is rather negative than positive attitude to trade agreements, and gladly puts it in his pocket the benefits the American economy receives from the problems abroad.
Of course, nobody knows when to stop this acute trade policy trump. But while inflation remains a distant Ghost, America’s economy will enjoy such an unusual type of growth.
Todd Buchholz was Director of economic policy under President George W. Bush and managing Director of a hedge Fund “tiger” (Tiger). He was awarded the Allyn young of Harvard University in Economics and is the author of books “New ideas from dead economists” and the “Price of prosperity”.
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