KT edit: Recession ahead but Trump has a wrecking ball
Powell is holding back on cutting interest rates by one percentage point as Trump presses for some quantitative easing.
Experts predict a recession by next year in the United States and President Donald Trump is already playing defence. No one wants an economic crisis when the age of Big Tech, Big Data, Big Finance and Bad Politics is upon us. There is pressure on jobs, but the US is chugging along on this front, at least for the moment, while other countries are having trouble generating employment for their growing populations who are young and restless. Besides, there are job losses as technology makes some jobs redundant. The economy is doing 'tremendously well', bellowed the US president who is trying to pin the blame on the Federal Reserve for being overly cautious. Fed chief Jerome Powell has been the target of the president's Twitter attacks over months.
Powell is holding back on cutting interest rates by one percentage point as Trump presses for some quantitative easing. But Trump could have triggered a likely recession by starting a trade war with China. The global economy has been hurt with free trade being hampered by a restrictive tariff regime sparked off by unilateral US actions. Meanwhile, Europe is facing troubles of its own with Germany staring at a recession and UK is all set for Brexit. Germany's woes began with the migration crisis emanating from Syria, Iraq and Africa four years ago. Chancellor Angela Merkel took a bold decision to let in one million refugees which provoked a backlash from far-right parties who cut into her votebank during local elections.
Populist politicians with extreme and often xenophobic views have made it to positions of power in Italy, Germany and Hungary. Add Russian President Vladmir Putin to the ranks of strongmen who remain stubborn in their positions when it comes to outsiders and fiscal policy, and Europe appears to be a continent in meltdown, a far cry from the melting pot of liberal culture and economics it once aspired to be. The European Union's powers have also been eroded with countries taking their own decisions, like the referendum which sparked Brexit in the United Kingdom.
Divisive politics is driving a wedge between countries and people. Maverick politicians are also naive and lack foresight when it comes to the larger good of people. Take Trump for example. Domestic interests guide his economic vision and it's okay if other parts of the world are faring poorly. His plan to lower interest rates could entice people to add to their debt as they borrow more. Globally, the warning signs are obvious and must be heeded. The German economy, Europe's largest, contracted by 0.1% in the second quarter. It could shrink further in the next quarter. The figures don't bode well for the US economy either despite Trump's denials. It actually slowed in the last quarter, with the annual pace of growth at 2.1 per cent. India has slowed to 6.8 per cent; China has fallen to 6 per cent. The world needs cooperation more than competition as multiple challenges lie ahead. Sadly, Trump is wielding a wrecking ball at the edifice of shared global growth and progress. America First has put the world last.