Blog - Views on the Economy and the World

Views on the Economy and the World

A blog by Jeffrey Frankel

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For Academic Citation:Views on the Economy and the World,” Views on the Economy and the World, https://www.belfercenter.org/publication/views-economy-and-world.

272 posts

Democrats are gearing up for the November mid-term elections, in which they hope to take back the US House of Representatives. Candidates are finding that the voters are not necessarily paying close attention to foreign affairs or even Trump scandals, and are more concerned about “pocketbook issues.” The conventional wisdom still stands: underlying the shock election of Mr Trump was the worry by the median household that it has been left behindby globalization and technological change and that the gains have been going to the rich instead.

President Trump enacted steel and aluminum tariffs in March, citing national security.  China is the intended target, as most other major suppliers were eventually exempted. On April 2, China retaliated by imposing tariffs on 128 American products (representing about $3 billion of trade), ranging from 15% on fruits to 25% on pork.  Trump April 3 announced 25% tariffs on another 1300 Chinese products [representing some $50 billion of trade], citing forced transfer of US technology and IPR. China on April 4 responded with plans for retaliatory 25% tariffs on 106 US exports -- including soybeans, autos, and airplanes -- to go into effect when the US tariffs do.  On April 5, the White House announced it was considering $100 billion of additional tariffs on China.

If these tariffs go ahead, yes, it is a trade war. How will it end?

In recent years, productivity growth in developed economies has been stagnating. The most prominent explanations of this trend involve technology. Technological progress is supposed to increase economies’ productivity and potential growth. So what’s going on?

Why has the dollar fallen since January 2017? My answer is an economic turnaround in the rest of the world. Also the level of the dollar remains rather high. But Larry Summers has a different answer.

I am honored that John Bogle has commented on my recent column,  "The February Stock Market Correction." In it I repeated my claim that 2017 saw a “bubble” in the #VIX – i.e., a market perception of low risk in US stocks that was unjustified by fundamentals – and I added that the bubble had burst in February. Bogle of course is the genius who made low-cost index #mutualfunds widely available. His comment & my reply are at Barron’s: “Bogle on Bubbles”.

Much has been written about the stock market correction in the time since the US market peaked on January 26 and abruptly fell 10 % (as of February 8, followed by a partial bounce-back). Some of what is said is useful, some is not. Three pronouncements concern advice to investors, the role of machines, and the connection to the real economy.

Congratulations to Ellen Johnson Sirleaf for yesterday winning the Mo Ibrahim Prize for Achievement in African Leadership. She recently retired as President of Liberia. It is for people like her that the award, which pays $5 million, was originally established. I explained and evaluated the Prize, a fascinating experiment, in “The Ibrahim Prize for Excellence Among African Leaders,” published in the African Policy Journal.

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There are lots of measures of inequality.  If we are interested only in income distribution within the United States, it doesn’t matter much which one we look at:  They all show rising inequality. But when we look at inequality internationally, which measure we look at makes all the difference.