As the G-7 Leaders gather in Ise-Shima, Japan, on May 26-27, the still fragile global economy is on their minds.  They would like a road map to address stagnant growth. Their approach should be to talk less about currency wars and more about fiscal policy.Fiscal policy vs. monetary policyUnder the conditions that have prevailed in most major countries over the last ten years, we have reason to think that fiscal policy is a more powerful tool for affecting the level of economic activity, as compared to monetary policy.

The ITC Wednesday released its mandated report on the economic effects estimated to result from the TransPacific Partnership.  As is usual in standard trade models, the estimated welfare gains may sound small: on the order of ¼ % of income.  But that would still be way worth doing.    Furthermore the ITC study, by design, leaves out a lot.  For example, the Petri-Plummer study from the Peterson Institute estimates income gains from TPP that are twice as large, in part because it takes into account Melitz-style opportunities for  more productive firms to expand.

US President Barack Obama has racked up a series of foreign-policy triumphs over the last 12 months. But one that has gained less attention than others was the passage last December of legislation to reform the International Monetary Fund, after five years of obstruction by the US Congress. As the IMF convenes in Washington, DC, for its annual spring meetings on April 15-17, we should pause to savor the importance of this achievement. After all, if the United States had let yet another year go by without ratifying the IMF quota reform, it would have essentially handed over the keys of global economic leadership to China.

There has been recent speculation that the Japanese authorities might intervene to push down the yen.  One can see the reasoning.  The yen has appreciated against the dollar by about 9 per cent this year, even though the fundamentals have gone the other way: weak growth and renewed easing of monetary policy.Saturday’s Financial Times even cites BNY Mellon as saying of the Bank of Japan, “Since mid-1993, they have on average intervened once every 20 trading days in dollar-yen.”   But this is misleading.

The mainstream media are busily reproaching themselves for having been so out of touch with the economic troubles of angry white working men that they were late in taking Donald Trump’s presidential campaign seriously.   Most of us can join in to admit that we were very slow to take Trump seriously.   For one thing, we all thought that any candidate would be permanently derailed by even a small number of the many things that Trump has said.  We used to call these gaffes — either the ones that seemed designed to alienate particular groups (Hispanics, women, etc.

Financial markets reacted to the outcome of the FOMC meeting on Wednesday, March 16, as if what the Fed had revealed was highly dovish, that is, diminishing expected future interest rates.  The markets focused on the shift in the “dots plot” which formally rescinds the Fed’s previous forecast that it would raise interest rates four times in 2016.  (Now it says twice.)   Furthermore, Chair Yellen in her press conference said, “Most Committee participants now expect that achieving economic outcomes similar to those anticipated in December will likely require a somewhat lower path for policy interest rates than foreseen at that time.

Eight years after the financial crisis broke out in the United States, there is as much confusion as ever regarding what reforms are appropriate in order to minimize the recurrence of such crises in the future.There continue to be some good Hollywood movies concerning the crisis, including one nominated for multiple Oscars at the February 28 Academy Awards.  The Big Short has been justly praised for making such concepts as derivatives easy for anyone to understand.  As has been true since the first of the movies about the crisis, they are good at reflecting and crystalizing the audience’s anger.

An extended version of my column on “China’s slowdown” now appears at VoxEU, including academic references.Someone at Seeking Alpha responds with the following question:  What are the odds of an outright recession in China, with substantially negative GDP growth?My reply:This scenario is certainly possible. I have even described financial bubbles-and-crashes as a sort of “rite of passage” that newly arrived economic powers undergo (Holland 1637, England 1720, US 1929, Japan 1990, Korea 1997).

Investors worldwide are closely watching the steep decline in China’s stock market.  The Shanghai Stock Exchange Composite Index is down more than 40% since June 2015.The reason observers are concerned is not because they themselves are invested: China’s stocks are overwhelmingly held by Chinese themselves.  Rather, many are interpreting it as evidence that China’s economy is going down the tubes.China’s growth rate has indeed slowed down and there are plenty of reasons to believe that the slowdown is not just temporary.

As the new year starts, Politico asks a set of economists for forecasts.  Prognostication from 23 appears at “Could the Economy Tank in 2016?”By the way, I think my forecast last time, two years ago, turned out to hold up pretty well:“Something important will get better in 2014: Fiscal policy will stop hurting the economy…The biggest impediment to economic expansion over the last three years has been destructive budget policy coming out of the Congress…There are good grounds for optimism in 2014.