America’s current account deficit is ballooning, making the US the world’s largest external debtor (only, of course, in absolute terms, as the US is far from the worst performer if the trade deficit is measured as a share of GDP). Yet despite huge and growing deficits, the dollar continues to soar. Although we have learned not to worry so much about falling stock markets, should we now worry about the US trade deficit and the almighty dollar? Indeed, isn’t the dollar poised to sink simply of its own bloated weight? Two things can bring the dollar down: loose talk from America’s Secretary of the Treasury, or a sharp deterioration in America’s relative economic performance compared to the rest of the world. Both risks have been tested this year. As a result, the dollar has vacillated. Both risks are now coming under control and so continuing strength for the dollar must be anticipated. There are two kinds of US Treasury Secretaries. The first are like Robert Rubin and understand that a strong dollar helps secure low interest rates and that low rates make for a long and broad boom. The other kind is found in the current US Treasury Secretary, Paul O’Neill, who think too much about competitiveness and know too little about capital markets. They like intervention, industrial cartels, target zones for currencies and the sundry other gimmicks that got a bad name back in the woeful economic era of President Jimmy Carter. Secretary of the Treasury O’Neill came into office from the world of manufacturing and so thinks like a manufacturer. But no matter how successful they were in their industry, manufacturers look at the economy from the rabbit hole up. They think a weak dollar is good for exports and a hard dollar hurts sales and market share. Hence they wince when they face a strong dollar and offer wishy-washy answers to any question concerning their policy toward the dollar. Secretary O’Neill, indeed, has been ambivalent about the dollar from day one. Instead of looking journalists firmly in the eye and pronouncing Robert Rubin’s reassuring mantra –
Across the European Union, millions of people who are willing and able to work have been unemployed for a year or longer, at great cost to social cohesion and political stability. If the EU is serious about stopping the rise of populism, it will need to do more to ensure that labor markets are working for everyone.
In a time of global uncertainty, a vision of “made in the Americas” prosperity provides a unifying agenda for the continent. If implemented, the US could reassert its historical leadership among a group of countries that share its fundamental values, as well as an interest in inclusive economic growth and rising living standards.
During a time of American waywardness under Donald Trump, the United Kingdom's national security has increasingly come to depend on the European Union as a buffer against Russian revanchism. Ironically, then, the safest form of Brexit might be the one that hurts the most, so long as it leaves behind a stable EU.
Standard economic theory says that net inward migration, like free trade, benefits the native population after a lag. But recent research has poked large holes in that argument, while the social and political consequences of open national borders similarly suggest the appropriateness of immigration limits.
Clearly, there is something appealing about a start-up-based innovation strategy: it feels democratic, accessible, and so California. But it is definitely not the only way to boost research and development, or even the main way, and it is certainly not the way most major innovations in the US came about during the twentieth century.
With the withdrawal of the Free Democrats from coalition talks, Chancellor Angela Merkel could be forced to form a minority government. That would not necessarily be a bad thing; in fact, a Merkel who can be called to account by the Bundestag may be the best alternative Germany has.
In the first 11 months of his presidency, Donald Trump has failed to back up his words – or tweets – with action on a variety of fronts. But the rest of the world's governments, and particularly those in Asia and Europe, would be mistaken to assume that he won't follow through on his promised "America First" trade agenda.