Download Trump`s Recipe For Disaster

Survey
yes no Was this document useful for you?
   Thank you for your participation!

* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project

Document related concepts

Non-monetary economy wikipedia , lookup

Balance of trade wikipedia , lookup

Transformation in economics wikipedia , lookup

International monetary systems wikipedia , lookup

Protectionism wikipedia , lookup

Balance of payments wikipedia , lookup

Chinese economic reform wikipedia , lookup

Transcript
Trump’s
RecipeForDisaster
RichardDuncan
h5p://www.richardduncaneconomics.com
MACROWATCH
Avideo-newsle-eranalyzingtrendsinCreditGrowth,Liquidity
andGovernmentPolicytoan>cipatetheirimpactoneconomic
growthandassetprices
h-p://www.richardduncaneconomics.com
ToSubscribetoMacroWatchata50%discount,visitthe
MacroWatchwebsite,clicktheSubscribetaband,when
prompted,usethediscountcouponcode:financial
It’sTooSoonToKnow,But…
•  Wesimplydon’tyetknowwhateconomicpolicies
PresidentTrumpwillputinplace.
•  However,basedonhiscampaignpromisesandwhat
we’velearnedsincetheelec>on,there’srealcausefor
concern.
•  Acombina>onoftaxcuts,increasedgovernment
spendingandpoliciesthatcurtailtradewouldbearecipe
fordisasterbecauseitwouldpushupinterestratesand
crushthehighlyleveragedUSeconomy.
•  Fivethingswilldeterminewhichwayinterestrateswill
move–and,therefore,thedirec>onofallassetprices
andtheeconomyoverall.
Here’sWhyInterestRates
AreSoImportant
•  Theglobaleconomicbubblecameverycloseto
collapsingintoanewGreatDepressionin2008.
•  ThatdisasterwaspreventedbyultralooseMonetary
Policy.
•  Centralbanksslashedshortterminterestratesto0%
andthen“printed”trillionsofdollarsworthofnew
moneyandusedittobuyfinancialassets.
•  Thatstrategyallowedcredittoexpandandcaused
assetpricestosoar,therebyrefla>ngtheglobal
economicbubbleandstavingoffeconomiccollapse.
•  Whathappensnextwilldependoninterestrates.
10-YearUSGovernmentBondYield
vs.CredittoGDPRa\o
1980topresent
16.00%
400%
14.00%
350%
12.00%
300%
10.00%
250%
But,now,ifinterestrates
rise,creditwillcontract
andtheeconomywillcrash.
8.00%
6.00%
Asinterestratesfell,creditbecame
moreaffordable.Creditexpandedand
CreditGrowthdroveEconomicGrowth.
4.00%
2.00%
2016Q1
DebttoGDP(rightaxis)
2014Q1
2012Q1
2010Q1
2008Q1
2006Q1
Source:TheFed
50%
2004Q1
10-YearUSGovernmentBondYield(le^axis)
150%
100%
2002Q1
2000Q1
1998Q1
1996Q1
1994Q1
1992Q1
1990Q1
1988Q1
1986Q1
1984Q1
1982Q1
1980Q1
0.00%
200%
0%
USTotalDebt=TotalCredit
US$millions,1952to2016
70,000,000
$65Trillion
60,000,000
$10trillionhigherthan
thepre-crisispeak.
50,000,000
40,000,000
CreditGrowthDrives
EconomicGrowth.
1964=$1trillion
2016=$65trillion
30,000,000
20,000,000
10,000,000
Q22016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
Source:TheFed
1960
1958
1956
1954
1952
0
HouseholdNetWorth
US$Billions,1980toQ32016
$90Trillion
90,000
And,asInterestRatesfell,
AssetPricesrose.A^er2008,
QEpushedupNetWorthby
$35trillion(+60%).Rising
assetpricecreatedaWealth
Effectthatboostedconsump\on
andeconomicgrowthintheUS.
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
2016
2014
2012
2011
2009
2007
2005
2004
2002
2000
1998
1997
1995
1993
1991
1990
1988
1986
1984
1983
1981
1979
1977
1976
1974
1972
1970
1969
1967
1965
Source:Fed
1963
1962
1960
1958
1956
1955
0
HouseholdNetWorth
asa%ofDisposablePersonalIncome
%,1951to2016
700
Thisra\oofWealthtoIncomeisnear
recordhighlevelsbecauseverylowinterest
ratesandQEhavepushedupassetprices.
650
600
550
500
450
Ifinterestratesnowrise,assetpriceswillspiralbackdown,crea\ng
anega\veWealthEffectthatwillpushtheeconomyintocrisis.
400
2015-10-01
2013-10-01
2011-10-01
2009-10-01
2007-10-01
2005-10-01
2003-10-01
2001-10-01
1999-10-01
1997-10-01
1995-10-01
1993-10-01
1991-10-01
1989-10-01
1987-10-01
1985-10-01
1983-10-01
1981-10-01
1979-10-01
1977-10-01
1975-10-01
1973-10-01
1971-10-01
1969-10-01
1967-10-01
1965-10-01
1963-10-01
1961-10-01
Source:Fed
1959-10-01
1957-10-01
1955-10-01
1953-10-01
1951-10-01
350
TheFiveFactors
ThatWillDetermineInterestRates
1. 
2. 
3. 
4. 
5. 
TheGovernment’sBudgetDeficit.
TheUSCurrentAccountDeficit
Quan>ta>veEasingbycentralbanksoutsidetheUS.
TheInfla>onRate
TheChineseRMBExchangeRatevs.theUSDollar.
1.TheBudgetDeficit
•  PresidentTrump’splanstocuttaxesandincrease
governmentspendingonthemilitaryand
infrastructurearequitelikelytocausethe
government’sbudgetdeficittoincreasevery
significantly.
USGovernmentBudgetSurplusorDeficit(–)
US$Millions,1960to2021es\mates,(FiscalYearsendingSept30)
400,000
200,000
Es\mates
0
-200,000
-400,000
Thebudgetdeficitsarecurrently
projectedtoaverage$519billionayear
from2017to2021.Thoseprojec>ons
don’tincludethelargeincreaseinthe
annualdeficitsthatislikelytoresult
fromPresidentTrump’sproposed
taxcutsandincreasedgovt.spending.
-600,000
-800,000
-1,000,000
-1,200,000
-1,400,000
2020est
2018est
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
Source:OfficeOfManagement&Budget
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
-1,600,000
2.CapitalInflows
•  BeforeBre-onWoodsbrokedown,tradeimbalances
andcapitalflowsbetweenna>onswereverylimited.
•  Butnowtheyhavebecomeverylarge.
•  CapitalinflowsintotheUnitedStateshavebecome
anenormouslyimportantsourceoffundingforthe
USBudgetdeficit.
•  Thelargerthecapitalinflowsare,theeasieritisto
financethegovernment’sbudgetdeficitatlow
interestrates.
TheUSFinancial&CapitalAccount
US$millions,1960to2015
900,000
$807bn
800,000
CapitalInflowsinto
theUnitedStates.
700,000
600,000
$463bn
500,000
400,000
300,000
200,000
100,000
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Source:BureauofEconomicAnalysis
1978
1976
1974
1972
1970
1968
1966
1964
1962
-100,000
1960
0
MirrorImage
•  TheCapitalInflowsarethemirrorimageofthe
CurrentAccountdeficit.
•  WhentheCurrentAccountDeficitgrowslarger,the
CapitalInflowsalsogrowlarger,makingiteasierto
financethebudgetdeficit.
•  But,whentheCurrentAccountDeficitshrinks,
CapitalInflowsalsoshrink,makingitmoredifficultto
financethebudgetdeficitatlowinterestrates.
TheCurrentAccount=TheFinancialandCapitalAccount
US$millions,1960to2015
1,000,000
Property
Bubble
MirrorImage
800,000
600,000
400,000
200,000
2014
2012
Source:BureauofEconomicAnalysis
CurrentAccount
2010
Financial&CapitalAccount
2008
-1,000,000
2006
CapitalInflowshaveapowerfuleffectonUSassetprices.
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1987Stock
MarketCrash
-600,000
-800,000
1980
-400,000
1978
1976
1974
1972
1970
1968
1966
1964
1962
-200,000
1960
0
CapitalInflowsMayShrink
•  Trump’splanstoforceUScompaniestobringtheirfactories
backtotheUS,torenego>atetradedealsand/ortoimpose
tradetariffsonChinaandMexicowouldallcausetheUS
CurrentAccountdeficittoshrink.
•  AsmallerCurrentAccountdeficitwouldcausethecapital
inflowsintotheUnitedStatestoshrink,too.
•  LesscapitalinflowswouldmeanlessdemandforUS
governmentbonds.
•  Thatwouldpushupinterestratesandpoptheassetprice
bubble.
•  So,wemustkeepacloseeyeontheUSCurrentAccount
Deficitbecauseitwilldeterminethesizeofthecapital
inflows.
3.Quan\ta\veEasing
•  Quan>ta>veEasingisthethirdfactorwemust
watch.
•  Clearly,whentheFedprintsmoneyandbuys
governmentbonds,thatpushesupthepriceofthe
bondsandpushesdowntheiryields.
•  Addi>onalQEfromtheFednowlooksunlikely,at
leastinthenearterm.(We’regoingtohavefiscal
s>mulusinsteadofmonetarys>mulus.)
OtherCentralBanks
•  However,wemustalsomonitortheQuan>ta>veEasingbeing
carriedoutbyothercentralbanksaroundtheworldbecause
QEoverseasimpactsUSinterestrates,too.
•  Currently,theECB,BOJandBOE(combined)areprin>ngthe
equivalentofroughly$500billioneverythreemonths.
•  Theyusethatnewmoneytobuytheirgovernments’bonds.
Thatpushesupthepriceoftheirbondsandpushesdown
theiryields.
•  LoweryieldsinEurope,JapanandtheUKarenowpunng
downwardpressureonUSgovernmentbondyields.
•  However,ifthosecentralbanksprintlessmoneyinthe
future,USinterestrateswouldprobablyrise.
HalfATrillionDollarsPerQuarter
TheBOJandtheECBarenowcarryingout
Quan\ta\veEasingonaverylargescale.
Herearethedetails:
Global QE
Per Month
US$
Exchange
Rate
US$ billion
per Month
US$ billion
per Quarter
BOE
£70 billion over 8 months
£8.75 billion
1.3
11.4
34.1
BOJ
Yen 80 trillion per year
Yen 6.67 trillion
100
66.7
200.1
ECB
Euro 80 billion per month
Euro 80 billion
1.13
90.4
271.2
168.5
505.4
Total
Source:CentralBanks
US$8.15trillion
GovernmentDebtCancelledThusFar
Central Bank Holdings Of Government Debt
Converted into US Dollars, billions
US$ Exchange Rate
US$ billions
BOE
£375 billion
1.3
488
BOJ
Yen 368 trillion
100
3,700
ECB
Euro 1,326 billion
1.13
1,500
Fed
$2,462 billion
Total
2,462
8,150
ThistotalisscheduledtoincreasebyUS$1trillionoverthenext6months.
Source:TheBOE,BOJ,ECB,Fed
TheAmountOfGovernmentDebtCancelled*SoFar
CentralBankHoldingsOfGovernmentDebt
Asa%ofTotalGovernmentDebt:
BOE
25%
BOJ
35%
ECB
12%
Fed
13%
Source:RDes>mates
*Effec>velyCancelled
Note:ThenumbersfortheBOJandECBareslightlyoverstatedbecausesomeof
theassetstheyhaveacquiredarecorporatebonds(butonlyasmallpart).The
importanceoftheFed’sQEisunderstatedbecauseinaddi>ontoowningUS$2.5
trillionofgovernmentbonds,theFedalsoowns$1.7trillionofasset-backed
mortgagedebt.
4.Infla\on
•  Infla>onalsoaffectsinterestrates.
•  Iftheinfla>onrategoesup,thedemandforbonds
willgodown–unlesstheyieldofferedonthose
bondsincreases.
•  Noonewilllendmoneyfor3%iftheinfla>onrateis
5%.
•  InrecentyearstheInfla>onRatehasbeen
excep>onallylow–despiteallthemoneythatthe
centralbankshavebeenprin>ng.
1.6%in
Oct.2016
Source:StLouisFed
WhatCouldCauseInfla\onToRise?
•  Infla>onhasfallensincetheearly1980sbecause
increasingtradewithlowwagecountrieshaspushed
downUSwagesandthepriceofconsumergoods.
•  Now,however,iftheUSimportslessfromlowwage
countries,thepriceofmanufacturedgoodswillrise,US
wageswillrise,andinfla>onwillrise.
•  Forcingcompaniestobringtheirfactoriesbacktothe
UnitedStatesorimposingtradetariffsonimported
goodswouldcauseinfla>ontoincrease.
•  Increasedgovernmentspendingcouldalsocause
infla>ontopickup.
5.TheChineseRMB
•  Finally,thevalueoftheRMBcouldalsoimpactUSinterestrates.
•  TheUnitedStateswillimportnearlyHalfATrillionDollarsworthof
goodsfromChinathisyear.
•  IftheRMBcon>nuestoweakenagainsttheDollar,thoseimports
willbecomecheaperandputdownwardpressureonUSinfla>on
rates.
•  IftheRMBweretostrengthen(whichisunlikely),thenthatwould
putupwardpressureonUSinfla>on.
•  Ofcourse,iftheUSputstradetariffsonChinesegoods,thatwould
causeaspikeintheUSinfla>onrate,whichwouldpushupUS
interestrates.
•  Bytheway,in2015theUSimported$483billionofgoodsfrom
Chinaandexported$116billionofgoodstoChina,resul>nginaUS
tradedeficitwithChinaof$367billion-orroughly$1billionaday.
ChineseRMBperDollar
1980toDecember2016
10.0
TheGreatChinaBoom
wasfuelledbyavery
weakcurrency.It
fellfordecadesun\l
1994.
9.0
8.0
7.0
6.0
From2006to2013,
theRMBappreciated.
But,now,itisfalling
again.
5.0
4.0
3.0
2.0
1.0
01/2016
01/2014
01/2012
01/2010
01/2008
01/2006
01/2004
01/2002
01/2000
01/1998
01/1996
01/1994
01/1992
01/1990
01/1988
Source:CEIC
01/1986
01/1984
01/1982
01/1980
0.0
TheUSTradeDeficitIsToBlame
•  PresidentTrumpbelievestheUStradedeficithas
beenresponsibleforthelossofmanufacturingjobs
intheUnitedStatesandthedownwardpressureon
USwagesthathasoccurredoverthelastseveral
decades.
•  Iagree.
•  I’vewri-enabouttheharmtheUStradedeficithas
donetotheUnitedStatesandaboutthe
destabilizingimpactit’shadontheglobaleconomy
inallthreeofmybooks.
TheDollarCrisis
Herearetheopeninglinesfrommyfirstbook,The
DollarCrisis:
“Theprincipleflawinthepost-Bre-onWoods
interna>onalmonetarysystemisitsinabilityto
preventlarge-scaletradeimbalances.Thethemeof
TheDollarCrisisisthatthoseimbalanceshave
destabilizedtheglobaleconomybycrea>ngaworldwidecreditbubble.”
NotEasy
•  However,unwindingtheUStradedeficitisgoingto
beverydifficult.
•  Overthepast35years,thatdeficithasbecomeTHE
driverofglobaleconomicgrowth.
•  Infact,theen>reglobaleconomyhasbeen
constructedaroundunbalancedtrade.
•  Atthispoint,thea-empttoeliminatetheUStrade
deficitcouldveryeasilycausetheglobaleconomyto
collapseintoanewGreatDepression.
USCurrentAccountBalance
100,000
US$Millions,1960to2015
0
-100,000
-200,000
-300,000
-400,000
-500,000
-600,000
-700,000
-800,000
Source:BureauofEconomicAnalysis
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
-900,000
Fromtheearly1980s,
theUSCurrentAccount
Deficitbecame
THEdriverofglobal
economicgrowth.Aslong
asthedeficitexpanded,
theglobaleconomy
prospered.
TheUndesirableConsequences
ofElimina\ngTheTradeDeficit
1.  IftheUSreducesitsimports,theglobaleconomywillshrink.
2.  IftheUSeliminatesits$1billionadaytradedeficitwith
China,China’seconomycouldcollapseintoadepression
thatwouldseverelyimpactallofChina’stradingpartners,
andpoten>allyleadtosocialinstabilitywithinChinaandto
militaryconflictbetweenChina,itsneighborsandtheUS.
3.  IftheUSCurrentAccountdeficitreturnstobalance,the
globaleconomywillsufferfrominsufficientDollarliquidity,
whichcouldcauseeconomicstagna>onorworse.
4.  Areduc>onofimportsfromlowwagecountrieswould
causeUSinfla>ontorise,whichwouldpushupUSinterest
rates.
USImports&Exports
US$Millions,1990to2015
3,000,000
WhentheUSbuyslessfrom
therestoftheworld,the
restoftheworldbuysless
fromtheUS.
2,500,000
2,000,000
1,500,000
1,000,000
IfUSImportsfall,
USExportswillfall,too.
500,000
2015
2014
2013
2012
Importsofgoodsandservices
2011
2010
2009
2008
2007
2006
2005
2004
Source:BureauofEconomicAnalysis
2003
Exportsofgoodsandservices
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
TheUndesirableConsequences
ofElimina\ngTheTradeDeficit
1.  IftheUSreducesitsimports,theglobaleconomywillshrink.
2.  IftheUSeliminatesits$1billionadaytradedeficitwith
China,China’seconomycouldcollapseintoadepression
thatwouldseverelyimpactallofChina’stradingpartners,
andpoten>allyleadtosocialinstabilitywithinChinaandto
militaryconflictbetweenChina,itsneighborsandtheUS.
3.  IftheUSCurrentAccountdeficitreturnstobalance,the
globaleconomywillsufferfrominsufficientDollarliquidity,
whichcouldcauseeconomicstagna>onorworse.
4.  Areduc>onofimportsfromlowwagecountrieswould
causeUSinfla>ontorise,whichwouldpushupUSinterest
rates.
China'sExports&Imports
US$Millions,1990to2015
2,500,000
2,000,000
1,500,000
1,000,000
WhenChinaExportsless,
itImportsless.Andwhen
Chinaimportsless,commodity
pricesfall,hur\ngthe
economiesandcurrenciesofthe
commodityproducing
countriesallaroundtheworld.
Exports
Imports
500,000
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Source:CEIC
1994
1993
1992
1991
1990
0
IfChina’sEconomyImplodes
•  China’seconomyisalreadyvergingoncrisis.Ithasmassive
excesscapacityacrossprac>callyeveryindustry.So,product
pricesarefalling,companiesareloss-makingandthebanking
systemisstuffedwithunrecoverableloans.
•  IfChina’stradesurpluswereeliminated,thenega>veimpact
onChina’seconomywouldbedevasta>ng.
•  Inalllikelihood,Chinawouldexperienceaseveredepression,
thatcouldthreatentheruleoftheCommunistParty.
•  Chinamightrespondmilitarily–justasJapandidatPearl
HarborarertheUSimposedanoilembargoonJapanin1941.
•  Nooneshouldunderes>matethedamagethatcouldresult
fromaneconomiccrisisinChina.
TheUndesirableConsequences
ofElimina\ngTheTradeDeficit
1.  IftheUSreducesitsimports,theglobaleconomywillshrink.
2.  IftheUSeliminatesits$1billionadaytradedeficitwith
China,China’seconomycouldcollapseintoadepression
thatwouldseverelyimpactallofChina’stradingpartners,
andpoten>allyleadtosocialinstabilitywithinChinaandto
militaryconflictbetweenChina,itsneighborsandtheUS.
3.  IftheUSCurrentAccountdeficitreturnstobalance,the
globaleconomywillsufferfrominsufficientDollarliquidity,
whichcouldcauseeconomicstagna>onorworse.
4.  Areduc>onofimportsfromlowwagecountrieswould
causeUSinfla>ontorise,whichwouldpushupUSinterest
rates.
GlobalLiquidityWouldDryUp
•  Whentheworldwasonthegoldstandard,“globalliquidity”
dependedonthediscoveryofnewgoldmines.Some>mes
therewastoomuchgold(16thCenturyEurope,whichcaused
infla>on)andsome>mesnotenough(late19thCentury
America,whichcauseddefla>on).
•  ButunderTheDollarStandard,globalliquidityisdetermined
bythequan>tyofDollarsintheglobaleconomy;andthe
principalwayinwhichDollarsareinjectedintotheglobal
economyisthroughtheUSCurrentAccountdeficit.
•  IftheUSCurrentAccountDeficitwereeliminated,thesupply
ofDollarliquiditywouldbetoo>ghttosupporteconomic
expansion.
•  Thatwouldprobablyresultinglobaleconomicstagna>onor
worse.
TheUndesirableConsequences
ofElimina\ngTheTradeDeficit
1.  IftheUSreducesitsimports,theglobaleconomywillshrink.
2.  IftheUSeliminatesits$1billionadaytradedeficitwith
China,China’seconomycouldcollapseintoadepression
thatwouldseverelyimpactallofChina’stradingpartners,
andpoten>allyleadtosocialinstabilitywithinChinaandto
militaryconflictbetweenChina,itsneighborsandtheUS.
3.  IftheUSCurrentAccountdeficitreturnstobalance,the
globaleconomywillsufferfrominsufficientDollarliquidity,
whichcouldcauseeconomicstagna>onorworse.
4.  Areduc>onofimportsfromlowwagecountrieswould
causeUSinfla>ontorise,whichwouldpushupUSinterest
rates.
TheUndesirableConsequences
ofElimina\ngTheTradeDeficit
5.  Theelimina>onoftheCurrentAccountdeficitwould
causeasharpreduc>onincapitalinflowsintotheUS,
whichwouldalsocauseUSinterestratestorise.
6.  Higherinterestrateswouldcausecredittocontractand
theUSeconomytogointorecession.
7.  HigherinterestrateswouldalsocauseasharpfallinUS
assetprices.That,too,wouldalsocausetheeconomy
togointorecession.
8.  Higherinterestratescouldcauseawaveofcredit
defaultsintheUSandaroundtheworld,poten>ally
leadingtoanewsystemicfinancialsectorcrisis.
ABe5erWay
•  Forallofthesereasons,I’mveryconcernedthatit
willnotbepossibletoeliminatetheUStradedeficit
withoutcausingtheglobaleconomicbubbleto
implodeintoanewgreatdepression.
•  Ratherthana-emp>ngtoeliminatethedeficit,it
wouldbewiserfortheTrumpAdministra>onto
allowthedeficittopersist,buttopursuepolicies
thatwouldincreaseaggregatedemandinthe
countriestheUStradeswithandalsointheUnited
Statesitself.
ABe5erWay
•  Forinstance,theUScouldenactpoliciesthatwould
forceChinatoincreasewagesinitsmanufacturing
sector.ThatwouldincreaseChina’sdemandforUS
goodswithoutcausingacrisisinChina.
•  Athome,theUSgovernmentcouldsharplyincrease
itsinvestmentinnewindustriesandtechnologies.
ThatwouldboostUSpurchasingpowerandgrowth–
and,thatinvestmentcouldbefinancedatverylow
interestratesthankstothedefla>onarypressures
andthecapitalinflowsresul>ngfortheUStrade
deficits.
Conclusions
•  TheproposalsoutlinedthusfarbyPresidentTrump
suggestthat:
1.  Thebudgetdeficitwouldgrowlarger(duetotax
cutsandincreasegovernmentspending);
2.  Thecurrentaccountdeficitwouldshrink(dueto
renego>a>ngtradedeals,bringingUSfactoryjobs
backtotheUSandpossiblytradetariffs);
3.  Andinfla>onwouldpickup(duetoincreased
governmentspending,higherUSwages,pressure
onChinatopushuptheRMBand,possibly,tariffs).
ARecipeForDisaster
•  Ifthosepoliciesreallyareadopted,theywouldbea
recipefordisasterbecausetheywouldpushUS
interestratessignificantlyhigher–andthatwould
poptheglobaleconomicbubble.
•  Ifitpops,itmaybepossibletoreflateitagainwith
evenlargeramountsofQuan>ta>veEasing.
•  Ontheotherhand,itmightnotbe,inwhichcasethe
worldcouldbeplungedintoanewGreatDepression.
•  Inthatscenario,massivewealthdestruc>onwould
onlybethebeginningofourproblems.Ourpoli>cal
ins>tu>onswouldprobablynotsurvivethestrain.
MACROWATCH
Avideo-newsle-eranalyzingtrendsinCreditGrowth,Liquidity
andGovernmentPolicytoan>cipatetheirimpactoneconomic
growthandassetprices
h-p://www.richardduncaneconomics.com
ToSubscribetoMacroWatchata50%discount,visitthe
MacroWatchwebsite,clicktheSubscribetaband,when
prompted,usethediscountcouponcode:financial