The notion of a ‘middle-income trap’ has entered the lexicon of policymakers in emerging markets in Asia and elsewhere. Many leaders of countries that have experienced fast growth — such as Chinese Premier Li Keqiang — worry that economic growth will come off the boil as their countries reach middle-income status.
A new study by the International Monetary Fund (IMF) investigates the dangers of financial systems that have grown too big too fast. The excessive growth of the American financial system causes an enormous drag on the US economy, reducing GDP by 2 percent every year. That equates to some $320 billion lost each year.
How Did This Happen?
It is not that May did not have its challenges. The German bund extended flash crash had knock-on effects throughout the capital markets. The dollar, which had been trending lower since mid-March, staged an impressive rally in the second half of May that completely unwound the weakness in the first half of the month, and carried it to new multi-year highs against the Japanese yen and New Zealand dollar.
The US dollar’s strong advance in the second half of May showed signs of tiring as last week drew to a close. It could be a function of month end flows, but the magnitude of the dollar’s advance and the near-term event risk will likely encourage more defensive activity.
A recent study has shown an interesting correlation between the drop in US alcohol-related car accidents and the overall growth of the US economy. According to the study, as the number of alcohol-related accidents has dropped, the US economy has experienced a corresponding boost to overall GDP.
A light bout of profit taking has seen yesterday’s strong dollar gains pared. Yesterday, the Dollar Index rose 1.3%, its biggest single day rise since July 2013. There has been a dearth of fresh trading incentives, and consolidative tone has emerged, with the greenback staying near yesterday’s highs.
A two-page paper published by John Nash in 1950 is a seminal contribution to the field of Game Theory and of our general understanding of strategic decision-making. That paper, “Equilibrium points in N-person games”, introduced a cornerstone concept, which came to be known as Nash equilibrium.
Game theory is concerned with situations where decisions interact – where the “payoff” or reward for a decision maker depends not only on his or her own decision but also on the decisions of others.
I’m not much for glossing over the true state of affairs just to make things look better, which is why I take issue with many government reports. When it comes to providing clear information on the economy, the U.S. government is more late-night pitchman than serious news anchor. And to make matters worse, many of the numbers they peddle have been “adjusted” so that reports show better results.
Of the 8.5 million Americans that remain unemployed, 40 percent of those have given up looking for work. The job participation rate has fallen to a 37-year low.
In a recent discussion, Pope Francis’ deputy, Cardinal Pietro Parolin, the Vatican’s Secretary of State, said the world would need to develop a new model of economic development. The Vatican believes this new model must marry economic growth with plans to combat poverty by seeking ways to use resources in a sustainable manner.
