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
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.
Due to changes in the global economy, oil exporters, especially those in the Middle East, must diversify into other industries in order to survive, states CNBC in a recent article. This is nothing new, but is becoming more urgent.
Countries such as the United Arab Emirates have began changes long time ago. Dubai, for example, has become not only a financial center, but a tourist destination as well. Now, Egypt is looking to make changes. Recently, International Monetary Fund’s leader, Christine Lagarde, praised Egypt for making significant progress with economic reforms. Ms. Lagarde admitted that it will take time before these structural changes take effect and make things better, but they still are needed.
Egyptian economy is now growing at 5 percent a year, a vast improvement from a deep crisis after the Arab Spring. Due to political turmoil and terrorist attacks, tourism has dropped, affecting many people. Back in 2016, IFM provided a $12 billion bailout to the country. There are other encouraging signs. Inflation peaked at 35 percent last July, but is expected to drop to 12 percent this year.
Still, there are many unresolved problems. The country’s population of 90 million continues to rise, making it difficult for the economy to give jobs to all young people. And that can lead to more unrest.
There are encouraging signs from other countries in the region, too. For example, Morocco has been doing fine lately when it comes to economic growth and stability.
When people in other countries talk about the United States these days, the conversation usually turns to the policies of the present administration. Even though President Trump has not put all his radical economic ideas in place, there are enough in place to let the world know that the United States is no longer a reliable trading partner on the world stage.
Trump has given The World Trade Organizations many sleepless nights over the last twelve months. He is pulling the plug on climate change policies as well as policies that do not serve his interests. The United States went from a loyal trading partner who took the good with the bad when it was the right thing to do, to a country that only accepts the good in a trade deal. In other words, the rest of the world owes Trump’s United States a favor. And Trump wants to collect what he thinks the world owes him.
No one expects Trump to start a trade war. His passive aggressiveness is obvious, however, and it is making the economic well-being in countries around the world vulnerable to political predators.
The United States set the global economic mood after World War II. Trump is throwing 72 years of global economic growth out the window, and many of the countries that support U.S. economic policies are on Trump’s chopping block too. Trump’s idea of making America Great Again comes at a high cost. The United States is losing friends and gaining economic enemies. Those enemies will hurt American consumers when the smoke from Trump’s economic shotgun approach starts to clear.
Some might not know, but India is making a move up in the global economy, and the country has the potential to grow much more than most people know. In the last year, India was able to surpass China as the fastest growing large economy in the entire world. They are home to a huge population that has the potential to have a mighty economic footprint, but they are still small when compared to economic leaders the European Union, China, and the United States.
In order for India to produce economic growth at a higher rate, they need to take some lessons from other economies around the globe. For starters, they need to set up a system of regulations that works to boost all stakeholders instead of the current top down system they employ. While most countries use regulations to gain wanted outputs, India is different because they use these regulations as personal tools to fit their personal agendas. This selfish mentality greatly limits the overall wealth of the country with a lack of job creation, economic growth, environmental causes and even social life within the country.
India should look to other countries for guidance in this area. The United States, as a prime example, has a blustering economy because the US Government creates and uses regulations that can improve the overall economic well being of the majority of the country. Most regulations are meant to improve economic activity, which would be a huge boost if similar agendas were used in India.
In short, there are really three key areas that India needs to focus on to improve their financial status. India needs to focus on approaching regulations by using the viewpoints of the government, the people and the people who have a stake in the financial gains and losses. This collaborative approach allows for a more well rounded viewpoint and regulations that have a more overall affect on all of the people. India should also asses the impact on all rules and deals to decide if the trade off for each item is worth the costs and terms on the table. Currently only their proposing agencies make the evaluations which presents a major conflict of interest and can often lead to bad deals. Finally, each agency should have authority over certain sectors with no overlap. this really only causes confusion as well as excess cost. Agencies should have their own areas of expertise at different levels to avoid confusion, wasted time, and most importantly, wasted money. For a more detailed outline of each approach as well as examples of areas that need improvement, check out this article at the Huffington Post.
While India has a ways to go, it is clear that they have stepped up and taken a position in the global economy, intent on trying to move up in the food chain. If they choose to follow some key steps an implement key strategies, they have all the tools necessary to do the job. It is within reason to expect to see the country become a more prominent economic player around the globe in the very near future.