After following numerous financial experts and economists aligned with various reliable sources, it has become clear that there is no real agreement or consensus on what will happen to the global economy in the next year. Ten years after the great recession, everyone agrees that the economies of most countries have bounced back, but are still somewhat tenuous.
But then comes along President Trump and his protectionist policies, including tariffs on products from China, Canada and the E.U. The trade war with China is especially dangerous. We must not forget that the continuous upsurge in the Chinese economy and their fiscal-monetary policies helped many economies to recover after 2008. However, the Chinese economy’s growth has slowed down and trade is less a factor than it was 10 years ago.
Domestic corporate, government and consumer debt has climbed in most industrialized countries, including in the U.S. and Canada. Much of the debt increase has of course resulted from the continuing low-interest rates for borrowing used to stimulate economies, but potentially at a considerable future cost. At the same time, any significant growth in wages has not occurred, leaving many people to rely on debt to maintain current standards of living. The richest people have greatly benefited from capital tax policies and by corporations who have preferred to benefit their shareholders. Most companies have also paid out big executive bonuses rather than reinvesting profits into their firms and R&D. In the U.S., executive compensation now represents more than 400 percent of the average worker’s annual wages.
As if in some kind of self-denial, stock markets have continued to climb despite a number of recent ominous economic signs. Given that we are in unknown territory with little room for manoeuvrability, even central banks appear to be at a lost as to what to do next. Most experts agree that there needs to be a major market correction given that the value of many stocks is out of whack with reality. In addition, the economies of E.U. countries are still in turmoil, especially with Britain’s decision to leave the Union and other members possibly following suit. Moreover, all you and I can do is sit and wait and hope for the best. After all, we don’t have the power of the American President to influence the global economy.
FROLITICKS 