A Stress Test for the Global Economy

The fiscal policies of the current US Administration, with its America-first drivers, have deviated from previous Administration’s policies, and provide a stress test to the global economy, according to a recent Bloomberg News article.

Dangers Beneath the Surface
On the surface the news looks good. The International Monetary Fund (IMF) World Economic Outlook is forecasting global growth of about 4% for the next two years. The Bloomberg article, however, suggests that the positive outlook may be misleading. Risks are increasing beneath the surface, it says, and some of these dangers are being created right here in the USA.
These risks include:
Continued Loose Monetary Policy
• Continued Loose Monetary Policy
Unprecedented US Debt
• Unprecedented US Debt
Excessive Fiscal Stimulus via the Recent Tax Cuts
• Excessive Fiscal Stimulus via the Recent Tax Cuts
Trade War Saber Rattling
• Trade War Saber Rattling

Discussion
Monetary policy remains very loose in the US, Europe and in other parts of the world. Global economies, however, have already picked up. Balancing interest-rate rises will stress growth going forward. In the US particularly, recent congressional passing of a major tax cut may excessively stimulate the American economy. Also, as an unpleasant backdrop, the US nation debt continues to shoot up.

Presidents Trump’s aggressive posture regarding trade deals is a critical mix in the overall equation. The threat of trade wars is real, and if realized, could quickly impact the economies of the globe. Only time will tell how these concerns will play out.

Leave a Reply